Europe midday: Shares hold gains despite weak EZ retail sales, hawkish Fed

by | Apr 7, 2022

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European shares held gains at midday on Thursday after the previous session’s fall, despite hawkish comments from the US Federal Reserve, weaker eurozone retail sales and an increase in sanctions against the Russian regime.
The pan-European Stoxx 600 index was up 0.5% in early deals after falling 1.5% on Wednesday. The UK’s commodity-heavy FTSE 100 fell as shares in energy giant Shell fell after the company said it would write down up to $5bn as a result of its decision to exit Russia after its invasion of Ukraine, higher than previously disclosed.

US and Asia markets were weaker overnight after minutes of the Fed’s March meeting showed officials last month “generally agreed” to cut up to $95bn a month from the central bank’s asset holdings as another tool in the fight against surging inflation.

Investors were also eyeing European Central Bank minutes due later on Thursday.

“While last nights Fed minutes were as hawkish as expected, today’s ECB minutes are likely to be somewhat of a contrast, even though it was announced that they would be tapering the asset purchase program steadily over the summer, with a view to ending it in Q3,” said CMC Markets analyst Michael Hewson.

“Last month’s hawkish pivot merely serves to underline what a bind the European Central Bank finds itself in. We’ve subsequently seen government bond yields push higher across the bloc, however it’s difficult to really see what else the ECB can do at this point.”

“Recent comments from a few ECB policymakers suggest there is rising concern that the ECB is behind the curve, and today’s minutes are likely to offer insights as to how significant this concern is, with the potential that we could well see rate hikes as soon as Q3.”

On the economic front, eurozone retail sales rose less than expected in February, according to figures released by Eurostat.

Retail sales increased by 0.3% on the month following a 0.2% rise in January, missing analysts’ expectations for a 0.6% jump. The volume of retail trade rose 3.2% for automotive fuels, and 0.8% for non-food products. For food, drinks and tobacco, it fell 0.5%.

In equity news, shares in housebuilder Countryside Partnerships slumped as it said annual profit would fall after publishing a damning review of its own operations.

The company said it expanded too quickly and botched the acquisition of Westleigh in 2018. Project delays, poor workmanship and rising costs also affected the group at some sites.

Shares in Italian airport and roads manager Atlantia spiked on a news that Global Infrastructure Partners and Brookfield Infrastructure said they had met with the firm’s main shareholder and made a preliminary non-binding proposal for a possible acquisition of the infrastructure group.

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