European stocks dropped sharply on Friday morning as after a sell-off on Wall Street the previous session, with investors showing concern about the likelihood of interest-rate cuts from the Federal Reserve.
The continued surge in oil prices – on the back of escalating tensions in the Middle East – was also hammering stocks given their potential to put reignite inflationary pressures worldwide. Brent crude was up 0.5% at $91.11 a barrel early on, having risen 5% over past five days and 10% over the past month.
By 0927 CEST, Europe’s Stoxx 600 was down 1% at 505.89, with losses of around 0.9% to 1.3% seen on major indices across the continent.
Wall Street’s equity benchmarks suffered losses of around 1.2-1.4% on Thursday, with the Dow suffering its worst four-day losing streak since October, on the back of hawkish comments from several Fed members. Investors are concerned that recent resilient economic data could delay a potential interest-rate cut by the central bank.
“The widely anticipated non-farm payrolls report later could add to volatility and investor unease should another blowout number be confirmed, which would throw further doubt on the likelihood of rate cuts,” said Richard Hunter, head of markets at Interactive Investor. “Taken in the context of the previous Fed member comments, a hot reading would exert further sharp downward pressure on sentiment and therefore share prices.”
Back on this side of the Pond, data out from Germany shoed that factory orders plummeted 10.6% in February after a revised 6.2% decline the previous month.
Investors were also keeping their eyes out for eurozone retail sales figures, due out at 1000 CEST, along with the all-important US employment report at 1330 CEST.
Market movers
Delivery Hero was one of the worst performers on the Stoxx 600, pulling back after a strong gain the previous session after activist investor Sachem Head took a 3.6% stake in the food delivery firm.
Sector peers Ocado and HelloFresh were also performing badly.
Airlines were under the weather as oil prices continued to rise, with Deutsche Lufthansa, Air France-KLM and IAG falling.
Banking stocks were also out of favour, with the Stoxx Europe 600 Banks Index falling over 1%. Barclays, Banca Monte dei Paschi di Siena, Banco Santander, UBS and Commerzbank were notable fallers.