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The pound fell below $1.14 for the first time since 1985 as dollar strength and recession warnings weighed on the British currency.

The pound fell as low as $1.135 at 8:50 a.m. London time, marking a new 37-year low before recovering slightly to $1.146 by late afternoon. This followed the release of figures showing a 1.6% drop in retail sales in August, which ING analysts said showed a “deteriorating consumer picture in the UK”.

European markets traded lower amid fears for growth, expectations of further rate hikes and continued volatility in the energy market weighed on equities.

The pan-European Stoxx 600 closed down 1.6%, with all sectors and major exchanges in negative territory.

Britain’s FTSE 100 ended down 0.6%, Germany’s DAX 1.7% and France’s CAC 40 1.3%.

Many sectors were down around 1.5%, including food and beverage and media. Auto stocks fell 1% despite data showing new car sales rose in the European Union for the first time in 13 months.

This follows three days of losses for European stocks, which particularly affected energy and technology stocks. However, bank stocks gained on Thursday after analysts at Morgan Stanley upgraded the sector.

The World Bank on Thursday warned of a global recession in 2023 and said the central bank hike may not be enough to bring down inflation.

Asia-Pacific stocks fell on Friday, with the Shanghai Composite down 2.3%, despite China’s industrial production and retail sales figures for August beating expectations.

ANZ analysts said risk-sensitive stocks and markets will continue to struggle against inflation fears and expectations of Federal Reserve rate hikes next week.

US stock futures were also down, with Wall Street heading for a big losing week.

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