The Dow Jones rose more than 150 points in a choppy session on Friday, and the S&P 500 gained 0.5% while the Nasdaq edged down 0.2%. Financial shares outperformed as the 10-year yield jumped to above 2.5%, the highest since early May 2019. On the other hand, high-growth stocks were hit the most as the prospect of higher interest rates threatens to undermine the valuations of tech companies in particular, whose profits lie further in the future. Meanwhile, investors continued to assess whether increasing inflation and higher interest rates would drag the US economy into a recession. Treasury Secretary Yellen said she expects the world's largest economy to remain resilient despite the Russia-Ukraine war. A similar view came from Fed chair Jay Powell during the latest policy meeting. Still, markets started to bet on a higher probability of the Fed lifting rates by 50 rather than 25 basis points in May. All three major averages notched second consecutive winning weeks.
The benchmark DAX 30 index rose 0.3% on Friday but ended the week nearly 1% lower while the pan-European STOXX 600 index remained near the 450 level, rising inflation and expectations of higher interest rates. On the data front, Germany’s Ifo Business Climate fell 8.1 points to a 14-month low of 90.8 in March, below market forecasts of 94.2, reflecting the first impact of the war in Ukraine on firms’ expectations. Meanwhile, the US struck a gas deal with the European Union, pledging to supply 15 billion cubic metres of liquefied natural gas to the block this year to help it wean off Russian energy dependence.
The FTSE 100 closed little changed at 7,480 on Friday and advanced about 1% on the week, nearing levels seen before the Russian invasion of Ukraine, as traders digested an unexpected decline in February retail sales, while continuing to monitor the response of the West to Russia’s invasion of Ukraine. On corporate news, HomeServe stocks climbed more than 8% after Canada’s Brookfield Asste Management said it was mulling a possible offer for the British home repair services provider. On the earnings front, engineering company Smiths Group saw 1H 2022 profits stay unchanged from the previous year, while revenues went up 3.7%. Meanwhile, United Utilities’ trading update mentioned expectations of higher revenues this year, driven by business client demand, while inflationary pressures will likely leave underlying profits unchanged.
The CAC 40 Index erased mid-session gains to closed marginally lower at 6,553 on Friday, extending the slight decline the day before. Following summits in Brussels, the US agreed to supply 15 billion cubic meters of natural gas to the EU, prompting utilities to lead the losses in the Paris, led by EDF (-3.2%). Meanwhile, banks also ended in the red, led by BNP Paribas (-2.2%), following concerning business sentiment data in Europe. On the other hand, energy stocks tracked higher oil prices to lead the gains. Also, Thales closed 2% higher after Naval Group, partly owned by the Thales, announced an order of three defence ships from by the Greek government. On the data front, the amount of French unemployed individuals came at a nine-year low for February.
The FTSE MIB index closed 0.6% higher at 24,558 on Friday, over performing major European indices .Telecom Italia (1.8%) closed higher after CVC Capital Partners expressed interest in the telecom’s reorganization and the potential of merging its fixed line assets with those of state-backed Open Fiber. Telecom Italia is already assessing KKR’s $12 billion takeover bid, despite the telecom’s recent profit warnings and downgrading. At the same time, Generally gained 1.9% following news that a leadership alternative to the board of directors promised higher earnings amid heavy cost cuts. On the other hand, Saipem closed 2.5% down, underperforming a strong energy sector after its board of directors approved a €2 billion capital increase and asset selloff to fund a turnaround following its downgraded earnings revision in January. The index closed the week 1.4% higher.
The Ibex 35 closed slightly higher at 8,331 on Friday, after two consecutive sessions of losses, as solid advances in shares of Merlin Properties, Indra and Naturgy more than offset a sharp decline in Siemens Gamesa. At the same time, Repsol finished in positive territory, amid a rebound in oil prices. Domestically, Spain's economy expanded 2.2% from October to December of 2021 compared with the previous quarter, up from a preliminary estimate of 2%, signaling resilience despite a resurgence in Covid-19 cases. However, some Spanish truck drivers have been striking for nearly two weeks due to soaring fuel prices, with widespread effects across several sectors, which will likely weigh on growth. For the week, the Ibex 35 lost about 1%, following two consecutive weeks of solid gains.