By Sruthi Shankar
(Reuters) -European shares fell on Friday, knocked by weaker commodity prices and mixed earnings reports, as investors assessed the path for monetary policy tightening amid slowing economic growth.
The pan-European STOXX 600 index fell 0.7%, with miners leading the losses as commodity prices dropped on worries about China’s expanding COVID-19 restrictions.
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The benchmark index closed flat on Thursday after the European Central Bank raised interest rates as expected but said “substantial” progress had already been made in its bid to fight off a historic surge in inflation.
“The market reaction suggests that investors interpreted the change in language regarding future interest rate hikes as a dovish signal,” analysts at BCA Research wrote in a note.
“Indeed, economic conditions warrant a slowdown in the pace of tightening.”
Data showed France’s economy eked out meagre growth in the third quarter but a sharp spike in inflation pointed to the headwinds looming in the final quarter of the year.
French blue-chip shares slipped 0.6% after numbers also showed consumer prices in October spiralled to a record high of 7.1% year-over-year.
Another data set showed the German economy grew unexpectedly in the third quarter as Europe’s largest economy staved off the threat of recession for now despite high inflation and concerns over energy supply.
Germany’s DAX slipped 0.8%.
Europe’s technology stocks fell 2.2% as a rout among Wall Street peers looked set to continue after a dire holiday-quarter forecast from Amazon.com Inc and a grim outlook from Apple Inc.
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Nearly half of the STOXX 600 companies have reported so far, with a net 20% topping analysts’ profit estimates, signalling a healthy beat, according to Morgan Stanley analysts. They, however, also pointed out that earnings revisions remain negative.
Volkswagen dropped 2.3% after Europe’s top carmaker reported third-quarter earnings behind pre-pandemic levels and said it expected deliveries to be similar to last year.
Danone gained 2.3% after raising its 2022 revenue growth forecast, as the French food group was able to increase prices to counter soaring costs.
Air France-KLM fell 9.3% after the airline trimmed its capacity outlook for the winter.
In London, IAG, the owner of British Airways, slipped 1.4% as its third-quarter revenue returned to pre-pandemic levels, while Natwest Group slumped 7.8% after the bank reported flat a quarterly profit, hit by bad loan charges from a worsening economic outlook and the cost of exiting its Irish business.
($1 = 1.0056 euros)
(Reporting by Sruthi Shankar in Bengaluru; Editing by Rashmi Aich and Savio D’Souza)
