European Shares Conclude Worst Quarter in a Year with Minor Gain, Reports Reuters

By Bansari Mayur Kamdar and Shubham Batra

European shares experienced an uptick on Friday, influenced by a decline in euro zone inflation for September, which bolstered expectations that the European Central Bank (ECB) may pause its interest rate hikes. However, the benchmark index concluded the quarter with its most significant decline in a year, down 2.5%.

The pan-European index rose by 0.4% on Friday, despite the quarterly loss. The inflation rate in the euro zone reached its lowest point in two years, indicating that the ECB’s series of interest rate hikes has effectively managed to curb soaring prices, though this has also begun to impact economic growth.

Davide Oneglia, director for European and Global Macro at TS Lombard, noted in a report, "If disinflation and stagnation persist as anticipated, discussions about rate cuts will arise sooner than markets expect."

In bond markets, the yield on Germany’s 10-year government bonds, viewed as the benchmark for the euro area, fell by 15 basis points to 2.818%.

Real estate shares, sensitive to interest rate changes, saw significant gains, rising by 2.7%—the largest increase in over ten weeks. Technology shares also benefitted, increasing by 1.1% following the softer inflation data. However, tech stocks have struggled this quarter, declining more than 10% amid rising bond yields fueled by concerns over prolonged high interest rates.

Conversely, oil and gas shares suffered during this trading session, dropping 1.3% as oil prices decreased due to macroeconomic uncertainties impacting a recent price rally.

Additionally, data revealed that German retail sales unexpectedly decreased in August, highlighting the adverse effects of high inflation on consumption in Europe’s largest economy. Meanwhile, inflation in France unexpectedly slowed in September.

Among individual stocks, Commerzbank emerged as the top performer on the STOXX 600, soaring 11.1% after announcing a revised payout policy for investors, aiming for a minimum 70% profit return for 2024. Adidas saw an increase of 6.2% following positive profit reports from its U.S. counterpart, Nike. Luxury brands such as LVMH and Richemont also recorded gains of 1.5% and 1.9%, respectively.

The commodity-heavy index in London edged up 0.1% and rose 1.0% over the quarter, surpassing other European counterparts. Revisions to official data released on Friday indicated that Britain’s economic performance since the onset of the COVID-19 pandemic has been stronger than previously believed, with growth outpacing that of Germany and France.