Yahoo Finance European stock markets slide despite UK economy posting strong growth
European stock markets tumbled into the red on Friday despite the UK economy posting its fastest growth since the second world war.
In London, the FTSE 100 (^FTSE) fell 0.2% on the day, recovering from deeper losses earlier in the session, with travel and leisure and technology leading the declines. The French CAC (^FCHI) tumbled 1.3% and the DAX (^GDAXI) was 0.5% lower in Germany.
It came as the British economy grew 7.5% last year thanks to a rebound in the spring when lockdown restrictions eased.
According to the Office for National Statistics (ONS) on Friday, it was the biggest rise in 80 years, since 1941, and meant the UK also posted the fastest growth in the G7 after a 9.4% fall in GDP in 2020.
It beat growth in the US, which came in at 5.7%, both France and Germany at 7% and 2.7% respectively, and Italy at 6.5%.
However, the British economy contracted by 0.2% in December as the Omicron variant weighed on recovery, but it was a smaller contraction than economists expected.
Read more: Heathrow loses 1.3 million passengers to Omicron fears
Across the pond, the S&P 500 (^GSPC) dipped 0.3% and the tech-heavy Nasdaq (^IXIC) fell 0.7%. The Dow Jones (^DJI) was trading flat at the time of the European close.
US consumer sentiment fell further in early February to a fresh decade low as inflation worries weighed on households.
The University of Michigan's sentiment index dropped to 61.7 – the lowest since October 2011. The measures of consumer expectations and current economic conditions both worsened this month, to 10-year lows.
"The impact of higher inflation on personal finances was spontaneously cited by one-third of all consumers, with nearly half of all consumers expecting declines in their inflation adjusted incomes during the year ahead," Surveys of Consumers chief economist, Richard Curtin, said.
"In addition, fewer households cited rising net household wealth since the pandemic low in May 2020, largely due to the falling likelihood of stock price increases in 2022.
It came after a sell-off on Wall Street on Thursday on the back of a rise in US inflation. This fanned expectations that the Federal Reserve will embark on a more aggressive campaign of monetary tightening.
The bigger than expected jump in US consumer price index (CPI) to a 40 year high of 7.5% in January sent yields sharply higher with the US 10-year surging through 2%.
Meanwhile the 2-year yield blasted through 1.5%, rising 26bps on the day, to finish above 1.6%. This week alone the US 2-year yield has risen by 30bps.
Watch: What is inflation and why is it important?
Michael Hewson of CMC Markets said: “The move higher was given added fuel by FOMC member James Bullard who said he favoured a 50bps hike in March, with another 50bps by July, while also suggesting that the central bank hold an emergency meeting and hike early.
“This seems unlikely given that they are still doing QE and it's due to end in March anyway, so a few more weeks isn’t likely to change too much, but it’s clear that he is spooked by yesterday’s inflation number, and he may not be alone.”
Asian markets fell on Friday, with the Hang Seng (^HSI) falling 0.1% in Hong Kong, and the Shanghai Composite (000001.SS) dipping 0.7%.
Sydney, Seoul, Wellington, Taipei, Manila and Jakarta also all tumbled into the red, although Singapore managed to inch higher.
The Nikkei (^N225) in Japan was closed for a holiday.
