(Sharecast News) – European shares were still lower on Friday driven by fears over future rate rises in the wake of hawkish central bank comments this week, and preliminary eurozone survey data showing manufacturing activity continued to slow although output marginally improved.
The pan-European Stoxx 600 index fell 0.38% with all major bourses lower. US stocks fell sharply overnight after the Federal Reserve paused rates, but said the case for cuts was yet to be made and in fact the next moves may be upwards to supress inflation.
Shares were mixed in Asia after the Bank of Japan remained an outlier and kept rates at 0.1% – a sharp contrast with the US and UK, which held paused a run of rate rises, but stayed hawkish on inflation and growth prospects.
“Thursday was a truly miserable day for US stocks, with the Nasdaq down 1.8% and the S&P falling 1.6%. The prospect of interest rates staying higher for longer has given investors a lingering headache and sentiment has worsened as the week progressed,” said Russ Mould, investment director at AJ Bell.
“Many investors had hoped we would approach the end of 2023 with a clearer picture on when interest rates will start to be cut. That scenario has now been muddied by comments from the Fed that it is prepared to raise rates further if necessary and keep a restrictive policy until there are clear signs that inflation is moving back to target levels.”
Eurozone manufacturing still struggling
In economic news, Eurozone output nudged higher in September, a closely-watched survey showed on Friday, but the struggling manufacturing sector continued to weigh on growth.
The flash HCOB Eurozone composite PMI output index came in at 47.1, up from 46.7 in August and marginally above forecasts, for a slight dip to 46.5.
However, the index remains below 50. A reading above the neutral 50 mark indicates growth but one below it suggests contraction.
The biggest drag on the composite index was the manufacturing sector. The Eurozone manufacturing PMI output index remained unchanged at 43.4, while the manufacturing PMI dipped to 43.4 from 43.5.
In Germany, Europe’s biggest economy, business activity fell for the third consecutive month in September due to a sustained decline in demand for goods and services, pointing to a “deep” economic contraction in the quarter, a preliminary survey showed.
The HCOB/S&P global German flash composite purchasing managers’ index rose to 46.2 in September from August’s 44.6, but below the 47.2 forecasts by economists.
In the UK, retail sales fell by 1.4% year-on-year in August, missing analysts’ expectations for a drop of 1.2%. On a monthly basis, retail sales rose by 0.4% – a sharp rebound from the 1.1% fall recorded in a rain soaked July. Food and clothing sales provided the boost, although internet sales fell as shoppers headed back to physical stores. Automotive fuel sales fell by 1.2% in August, linked to the significant increase in petrol and diesel prices.
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Ubisoft rose as Britain’s competition regulator said Microsoft’s revised effort to get its Â£55bn takeover of Activision Blizzard “substantially addresses previous concerns.”
The new remedy would see Call of Duty maker Activision’s cloud streaming rights outside of the EU being sold to Ubisoft.
Reporting by Frank Prenesti for Sharecast.com