The falls were broad-based, with all sectors bar one in negative territory. “However, low interest rates should not be used as the justification for everything that goes wrong with banks today”. Weak economic data from Germany and France, along with disappointing Chinese inflation data, added to the negative mood. The rise in bond yields undermined the potential for gold support and the dollar recovered some ground during the U.S. session. The test provoked strong reactions from several countries, including the US, China, Russia and Japan.
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On Thursday, ECB President Mario Draghi, speaking after the central bank kept its policy on hold as expected, said the ECB was looking at options to continue its money-printing programme, but maintained the March end-date for asset purchases.
Comments from Boston Federal Reserve President Eric Rosengren have renewed worries about a near-term rate hike.
Draghi was keen to promote the role of fiscal policy, increasing speculation that the overall G20 plan will be a greater emphasis on fiscal rather than monetary policy. He rather added that “favorable financing conditions and improvements in the demand outlook and in corporate profitability continue to promote a recovery in investment”.
Among risers, British software company Micro Focus surged 14.7%, the best-performing stock on the STOXX 600 index, after sealing an $8.8 billion deal for Hewlett Packard Enterprise to merge its non-core software assets with Micro Focus’s business. USA shares were set to drift lower with Dow futures slipping 0.1 percent and S&P 500 futures down 0.2 percent.
Germany’s DAX fell 0.4 percent, and France’s CAC 40 and Britain’s FTSE 100 were both down 0.3 percent, while US futures pointed to a fall of around 0.2 percent at the open on Wall Street.
European shares closed lower, with the FTSEurofirst 300 off 0.38 per cent at 1,374.26.
The U.S. dollar rose after Rosengren’s remarks ratcheted expectations of a near-term increase in U.S. interest rates. The drug-maker is looking to sell peripheral businesses as it pursues a takeover of Monsanto.
Oil prices pulled back after surging more than 4 percent on Thursday. Murphy Oil climbed $1.90, or 6.8 percent, to $29.75.
Broker downgrades weighed on Bunzl (BNZL.L), which dropped 3.4 percent after HSBC cut its rating on the stock to “hold”, citing macro uncertainty, and Burberry (BRBY.L), which fell 2.5 percent after Goldman Sachs removed the luxury goods stock from its Sustain Focus List.
The market bellwether S&P 500 index was down 0.3% at 2,180. It was up 0.2 percent for the week. Tesla fell 1.5 per cent to $198.63 after Cowen and company began coverage of the stock with an “underperform” rating.
Consumer prices in the euro area rose 0.2 percent in August from a year ago, according to the median forecast of analysts in a Bloomberg survey. Shipments were expected to rise 0.3 percent.
In Asia, Chinese inflation data is a key focus, a day after data showed the country’s imports unexpectedly rose in August for the first time in almost two years, boosted by coal and other commodities. In June, production had declined 0.7 percent. Economists had forecast a deficit of GBP 11.7 billion.
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The ONS said construction output stalled in July, compared to a 1% drop in activity in June. Paddy Power Betfair remained unchanged at €107.50.
