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(Reuters) -European shares fell on Friday after a Wall Street rally fuelled by tame inflation data fizzled out, while UBS shares jumped after the Swiss lender ended a state guarantee that was granted for its takeover of Credit Suisse.
The pan-European STOXX 600 lost 0.9%, with miners and real estate stocks leading the losses.
All the main regional markets also fell, with UK’s FTSE 100 sliding 1% as the pound gained after data showed Britain’s economy eked out some unexpected growth in the second quarter.
Wall Street’s main indexes closed nearly flat on Thursday, having rallied as much as 1% during the session after data showed U.S. consumer prices increased moderately in July, a trend that could persuade the Federal Reserve to hold interest rates next month.
However, U.S. and European bond yields continued to rise, putting pressure on equities. [US/] [GVD/EUR]
“The Fed is, in particular, interested in core services CPI in the United States, which again showed a slight pickup over expectations, so that accounted for the adjustment that we saw in the equity market yesterday,” said Jeremy Batstone-Carr, European strategist at Raymond James.
“The takeaway from that is that markets are concerned that central banks’ 2% medium-term targets won’t be achieved.”
While the Fed is expected to pause its aggressive monetary tightening cycle, investors are concerned about the outlook for the global economy and the possibility of further rate rises from the European Central Bank.
The benchmark STOXX 600 is set to end the week with a tiny 0.2% gain as upbeat earnings countered a rout in European banks earlier this week following Italy’s shock decision to hit banks with windfall tax.
The basic resources sector fell 1.5%, on track for its biggest weekly decline in seven, as metal prices came under pressure after weak economic data from China fed into concerns about slowing demand in the world’s top metals consumer.
Among the bright spots on Friday, Switzerland’s biggest bank UBS advanced 4.7% after it said it won’t need the government guarantee it secured to rescue failing rival Credit Suisse.
Telecom Italia (BIT:TLIT) edged higher after Italy’s Treasury signed a preliminary agreement with U.S. fund KKR, which will allow for the government to buy up to 20% of the company that will own the telecoms major’s landline grid.
Bechtle added 5% after the German IT firm reported better-than-expected second-quarter results.
