European shares slide as investors await interest rate hikes

European shares fell on Tuesday as investors worried about the squeeze on economic growth from aggressive monetary policy tightening by central banks, implemented in a bid to tame rising inflation, while retail stocks declined after a gloomy warning from US retailer Target.

Australia’s central bank raised interest rates by 50 basis points, the most in 22 years, and flagged more tightening to battle rising prices. This comes as investors await a European Central Bank (ECB) meeting as well as US inflation data this week.

The ECB has signalled rate hikes starting next month, and investors are waiting to see if record-high inflation in May will lead to a change in stance at Thursday’s meeting.

DUBLIN

The Iseq index declined 0.7 per cent in line with the negative mood across European equity markets. Building materials group CRH, the largest stock on the Dublin market, slipped 0.8 per cent to €38.57, while another index heavyweight, Ryanair, fell 1.1 per cent to €13.84.

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A turbulent recovery for tourism and air travel

Listen | 35:24

Tourism and air travel have rebounded strongly in 2022 after two years of pandemic restrictions. But both are also facing major issues around pricing, staff and availability of product.Hotelier Lorraine Sweeney and Irish Times Business Affairs Correspondent Mark Paul outline some of the problems faced by the hospitality sector. Ciarán is also joined by aviation expert, Joe Gill of Goodbody, to discuss how airlines across Europe are faring and whether the queuing at Dublin Airport will have a lasting impact on Ireland’s reputation as a tourism destination.

Packaging group Smurfit Kappa was also in the red, finishing down 0.45 per cent at €37.82, while Paddy Power owner Flutter Entertainment shed 1.1 per cent to close at €106.95. Food stocks Kerry and Glanbia were also among the fallers.

AIB was one of the few gainers, adding 1.4 per cent to €2.47, but Bank of Ireland nudged down 0.3 per cent to €6.28.

LONDON

UK shares edged lower as expectations of more tightening by major central banks weighed, while JD Sports fell after the national antitrust watchdog found the retailer involved in price-fixing.

The blue-chip FTSE 100 fell 0.1 per cent with banks leading losses, while the mid-cap index fell 0.5 per cent.

British shoppers facing a surge in inflation cut their spending in May by the most since the country was in a Covid-19 lockdown in early 2021, according to a survey.

Ted Baker plunged 18.4 per cent after the fashion chain said its preferred bidder will not make a takeover offer.

Britain’s biggest sportswear retailer JD Sports Fashion fell 3.9 per cent after the UK’s competition watchdog provisionally found that JD Sports and Elite Sports, along with Rangers Football Club, fixed retail prices of certain Rangers-branded clothing products.

Retailers were among the top decliners on the FTSE 100, down 2.2 per cent, while oil & gas stocks rose 1 per cent on the back of stronger crude prices.

EUROPE

The pan-European Stoxx 600 index fell 0.3 per cent, with the retail stocks index down 0.9 per cent after Target slashed its quarterly margin forecast for the second time in less than a month. In Frankfurt, the Dax dropped 0.66 per cent, while in Paris, the Cac 40 ended 0.7 per cent lower.

Rate-sensitive technology stocks fell 1.1 per cent, with French software maker Dassault Systemes shedding 2.3 per cent after a brokerage downgraded the stock.

SAS slumped 13.9 per cent after the Swedish government said it would not inject new capital into the loss-making airline and did not aim to be a long-term shareholder in the company.

NEW YORK

Wall Street stocks slipped in choppy early trading as investors digested Target’s gloomy margin forecast that spooked the retail sector while awaiting inflation data due later this week.

Shares of Target slid 4.3 per cent as the big-box retailer said it would have to offer deeper discounts and cut back on stocking discretionary items. The weak outlook weighed on other retail stocks, with main rival and Dow component Walmart falling 2 per cent. Dollar General, Costco, Home Depot and Best Buy fell between 0.4 per cent and 2.3 per cent.

Kohl’s jumped 7.9 per cent as the department store chain entered exclusive talks with retail store operator Franchise Group over a potential sale that would value it at nearly $8 billion (€7.5 billion).

Additional reporting: Reuters