Stocks in Europe struggled for direction after days of choppy trading driven by the war in Ukraine and investors bracing for tighter monetary policy from central banks.
The Stoxx 600 share index, which is on track for a weekly gain but is down more than a tenth for the year so far, moved between small gains and losses in early trades. Germany’s Xetra Dax added 0.5 per cent and London’s FTSE 100 rose 0.7 per cent.
The moves followed falls on Thursday after the European Central Bank announced it would reduce its bond-buying scheme earlier than initially planned, causing a broad sell-off of eurozone government debt.
A surge in the February reading on US consumer inflation to its highest level in 40 years reinforced expectations the US Federal Reserve would raise interest rates.
European sovereign bonds were largely steady on Friday after wide moves in the previous session. The yield on Germany’s 10-year Bund edged 0.02 percentage points lower to 0.26 per cent. On Thursday the gap between Italy’s benchmark borrowing costs and Germany’s, as measured by the income yields on the nations’ 10-year bonds, widened by its most since April 2020 as traders calculated the effect of less ECB support for weaker eurozone economies.
Clouding the global outlook, analysts at Goldman Sachs downgraded their US economic growth forecast for 2022 to 1.75 per cent on Thursday evening, from 2 per cent previously.
Jan Hatzius, chief economist at Goldman, said the downgrade was made “to reflect higher oil prices and other drags on growth related to the war in Ukraine”.
“We also expect modest drags on growth from further tightening of financial conditions, lower consumer sentiment and slower growth in Europe, and see additional downside risks if shortages of key metals constrain US production,” he added.
In Asian markets, Hong Kong’s Hang Seng index shed 1.3 per cent and Japan’s Topix fell 1.7 per cent. Australia’s S&P/ASX 200 dropped 0.9 per cent. China’s CSI 300 was up 0.3 per cent.
Selling in Hong Kong was amplified by an announcement from the US Securities and Exchange Commission naming five Chinese companies listed in New York that will be delisted if they do not hand over audit documents, triggering a sell-off in US-traded Chinese stocks.
The Hang Seng Tech index fell as much as 8.9 per cent on Friday — later closing down 3.8 per cent — after the Nasdaq Golden Dragon China closed down 10 per cent at its lowest level since 2016.
The price of oil, which has swung in recent days, steadied on Friday morning with Brent crude, the international benchmark, up 2.3 per cent at $112 a barrel. West Texas gained 1.8 per cent to $108.
