European stock markets tumbled Friday nearing the end of a highly volatile trading week worldwide as investors weighed expectations of economic recovery against soaring inflation, rising interest rates and mixed earnings.
Meanwhile, Wall Street opened higher on signs that inflation might be waning, while oil prices kept marching higher.
The week’s equity trading has been dominated by Federal Reserve policy as the US central bank seeks to battle decades-high inflation by embarking on a series of interest rate hikes that could derail strong growth rebounds following pandemic lockdowns.
By contrast, the European Central Bank is sitting tight, putting pressure on the euro which Friday struck a 19-month low versus the dollar.
Rising tensions between Russia and the West over the Ukraine crisis are adding to the jittery mood on trading floors, where a selling frenzy this month wiped around $7 trillion off valuations around the world.
“Downbeat mood rounds up a volatile week for markets,” said Victoria Scholar, head of investment at Interactive Investor.
In Europe equities trading, both Frankfurt and Paris were down more than 2.0 percent at one point during afternoon trading.
Traders were also digesting growth data out of Europe’s biggest economies.
The German economy ended 2021 on a downward note, shrinking by 0.7 percent in the fourth quarter as bottlenecks and coronavirus restrictions took their toll, official figures showed.
Overall, last year Germany’s economy grew by 2.8 percent, Friday’s data added, far slower than its neighbour France, which expanded by seven percent in 2021.
Wall Street’s main stock indices moved higher at the start of trading after data showed inflation slowed month-on-month in December.
Patrick J. O’Hare at Briefing.com called a market rebound based on the data “a little self-serving … considering this is like the seventh straight month we have heard that same line of thinking and, well, here we are.”
The annual inflation rate still ticked higher to 4.9 percent from 4.7 percent in November. Meanwhile, data showed that personal spending declined 0.6 percent in December under the impact of Omicron.
“The consumer inflation rate is at a near 40-year high, wage pressures are building, supply chains are still tangled, oil prices are at a seven-year high, and more and more companies are talking about ongoing cost pressures,” said O’Hare.
“So, please excuse us for taking the hopeful disinflation narrative at the moment with a grain of salt,” he added.
While stock markets have rallied for the best part of two years to record or multi-year highs, analysts said a hefty pullback is to be expected, owing to profit-taking and the removal of massive pandemic-era stimulus by central banks and governments.
– Oil gains –
Crude oil prices remained well supported after a strong trading week, aided by the Ukraine-Russia crisis, with Brent rising above $91 per barrel.
“Russia’s supply of natural gas to Western Europe could further spark volatility across financial markets, and as we turn the corner on the pandemic we now see a possible conflict as one of the biggest threats to markets in 2022,” predicted Federated Hermes analyst Lewis Grant.
– Key figures around 1430 GMT –
London – FTSE 100: DOWN 1.1 percent at 7,461.69 points
Frankfurt – DAX: DOWN 1.9 percent at 15,236.51
Paris – CAC 40: DOWN 1.6 percent at 6,914.55
EURO STOXX 50: DOWN 1.8 percent at 4,110.45
New York – Dow: UP 0.2 percent at 34,213.24
Tokyo – Nikkei 225: UP 2.1 percent at 26,717.34 (close)
Hong Kong – Hang Seng Index: DOWN 1.1 percent at 23,550.08 (close)
Shanghai – Composite: DOWN 1.0 percent at 3,361.44 (close)
Euro/dollar: UNCHANGED from late Thursday at $1.1147
Pound/dollar: UP at $1.3423 from $1.3381
Euro/pound: DOWN at 83.07 pence from 83.27 pence
Dollar/yen: UP at 115.41 yen from 115.36 yen
Brent North Sea crude: UP 2.0 percent at $91.09 per barrel
West Texas Intermediate: UP 2.0 percent at $88.32 per barrel