[BENGALURU] European shares fell on Friday (Oct 17), as signs of credit stress at US regional lenders unnerved investors and drove them into safe-haven assets.
The continent-wide Stoxx 600 index closed nearly 1 per cent lower, but still logged a modest weekly gain of 0.4 per cent.
European banks were down 2.5 per cent, with Deutsche Bank, Barclays, Italy’s Unicredit and France’s BNP Paribas all losing between 3.3 and 6.5 per cent.
US regional bank stocks fell after two lenders disclosed loan fraud, driving concerns around credit quality after two recent US auto bankruptcies had put investors on edge about the sector’s exposure.
The sell-off comes more than two years after Silicon Valley Bank’s failure, when high rates drove paper losses on its bonds.
The flight to safety pushed gold to a record high of US$4,378.69 per ounce.
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“If the latest credit jitters have a more profound impact on broader credit and equity valuations, and financial conditions tighten, then the Federal Reserve will respond and the trajectory towards 3.5 per cent next year could be in place,” said Kenneth Broux, senior strategist at Societe Generale.
French stocks log best week since April
Luxury stocks helped cushion the broader market as Ray-Ban maker EssilorLuxottica jumped 13 per cent, adding nearly US$20 billion in market value as investor enthusiasm for its AI-powered Ray-Ban Meta glasses gathered momentum.
Luxury was also the best performing sector this week, powered by LVMH, which beat forecasts and reported its first quarterly sales rise this year.
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Continental was up 11.3 per cent after the German auto supplier’s preliminary third-quarter sales came in at five billion euros, just ahead of its own consensus forecast.
An absence of US economic data due to a prolonged government shutdown, simmering trade tensions between the US and China, as well as concerns about stretched valuations in the technology sector, have kept markets in check this week.
French stocks posted their best weekly performance in nearly six months, though, after Prime Minister Sebastien Lecornu survived twin no-confidence votes, having shelved controversial pension reforms – a move that could eventually help pass a tough budget.
“France could learn a thing or two about fiscal policy from those countries that needed bailouts during the euro-zone crisis,” said Adrian Prettejohn, Europe economist at Capital Economics.
The Stoxx aerospace & defence index dropped 3.6 per cent after US President Donald Trump and Russian President Vladimir Putin agreed to another summit on the war in Ukraine. Novo Nordisk fell 6.4 per cent after Trump said the price of the Danish drugmaker’s best-selling weight-loss drug would be lowered and that negotiations over price changes would be swift.
Spain’s BBVA gained 6 per cent after the lender failed to convince Sabadell shareholders to back its 16.32 billion euros (S$25 billion) hostile takeover bid. BBVA said that it would immediately resume shareholder remuneration. Sabadell’s shares were down 6.8 per cent. REUTERS
