European stocks fall as hawkish bets fan recession fears

3 minute read

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 28, 2022. REUTERS/Staff

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  • Powell, Lagarde stick to hawkish rhetoric
  • German inflation dips in June on one-off effects
  • Stronger-than-expected results lift H&M shares
  • Just Eat Takeaway hit record low on doubts over Grubhub

June 29 (Reuters) - European shares fell on Wednesday, as fears about a global recession deepened after chiefs of the European Central Bank and U.S. Federal Reserve Chairman stuck to their hawkish stance.

The continent-wide STOXX 600 index (.STOXX) dropped 0.7%, snapping a three-day rally.

Losses were broad-based, led by real estate (.SX86P) and auto (.SXAP) sectors, which fell 3.5% and -2.6%, respectively. Banks (.SX7P) and miners (.SXPP) were among the other big drags.

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The era of ultra low inflation that preceded the pandemic was unlikely to return and central banks needed to adjust to significantly higher price growth expectations, ECB President Christine Lagarde said. read more

Fed Chair Jerome Powell, meanwhile, said that while there was risk of recession, the bigger risk is rising prices. read more

"Given the skittish nature of investors right now, Powell's comment about controlling inflation requiring 'some pain' was bound to cause more investors to hit the sell button," said Chris Beauchamp, chief market analyst at online trading platform IG.

"It does look like we are still in the first phase of this bear market... So far a sustained bounce seems unlikely."

The STOXX 600 has shed 15% this year and set for its worst quarter since the COVID-19 led carnage in 2020, as uncertainty about Russia-Ukraine war, soaring price pressures and central bank policy moves to tame it dampen risk appetite.

"Markets know we are in a slowdown, what they are grappling with is where growth slows to and how quickly," said strategists at TS Lombard. "Our base case is a recession across major markets."

Meanwhile, data on Wednesday showed German inflation dipped against expectations in June, but analysts warned against seeing it as an early end to price pressures as the figures were driven by one-off effects. read more

A separate survey showed economic sentiment in the euro zone was slightly more robust than forecast thanks to improving morale in the industrial and services sectors.

But Germany's DAX (.GDAXI) was still down 1.7% following a three-day rally.

Spain's blue-chip index IBEX (.IBEX) fell 1.6%, as preliminary data showed Spanish 12-month inflation accelerated to a higher-than-expected 10.2% in June, the first time since April 1985, from 8.7% in the previous month. read more

Just Eat (TKWY.AS) slumped 16.5% to all-time lows amid doubts the loss-making company would successfully sell its U.S. Grubhub operation, and whether it would be able to reach profitability without additional funding. read more

H&M (HMb.ST) gained 2.2% after the world's second-biggest fashion retailer reported a forecast-beating 33% increase in quarterly profit. read more

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Reporting by Devik Jain and Susan Mathew in Bengaluru; Editing by Rashmi Aich and Alex Richardson

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