European shares plunged on Friday, after solid job growth in the United States enhanced the case for the Federal Reserve to continue aggressively raising interest rates in an effort to combat excessive inflation.
Also, the STOXX 600 index for the entire continent fell 1.2%, marking the third straight session of losses.
In addition, the eagerly anticipated non-farm payrolls report revealed that American businesses recruited more people than anticipated in September as the unemployment rate fell. That fueled the expectations that the Fed will raise interest rates by 75 basis points for the fourth consecutive month.
“The information doesn’t significantly alter the overall impression. It just serves to confirm the notion that the Fed hasn’t stopped tightening “said Capital.com market analyst Daniela Hathorn.
Therefore, there is no reason for the Fed to ease monetary policy because both the jobless rate and inflation are at record highs.
The report followed the publication on Thursday of the minutes from the most recent European Central Bank meeting, which had stoked concerns of significant interest rate increases to rein in the euro zone’s growing inflation.
Nevertheless, investors will now be keeping an eye out for September’s consumer prices report next Thursday to determine the likelihood for future policy tightening. Fed policymakers will adhere to their hawkish tone and escalating concerns over increasing interest rates.
Even yet, the STOXX index saw weekly gains of about 1% as shares briefly rose in the first few sessions of the week on hopes that major central banks will moderate their hawkish stance on monetary policy.
Besides, the index experienced its strongest performance during the past week.
Moreover, rate-sensitive technology stocks led all STOXX sectors lower on Friday, falling 4.3%. Industrials and real estate stocks sank 2.4% and 2.3%, respectively, after them.
After South Korea’s Samsung Electronics Co. and the U.S. chipmaker AMD warned that the chip downturn would be far worse than anticipated, European chipmakers including Infineon and BE Semiconductor experienced losses of between 3% and 7%.
Adidas suffered a 5.2% loss when Kanye West’s business relationship with the German sportswear company was put on hold.
Renault stocks increased by 4.9% after ODDO BHF upgraded the French automaker’s stock.
