European equity markets fell on Friday, extending the sharp losses from the week amid deepening concerns of prolonged hawkish monetary policy from the Federal Reserve and heightened credit risks in China. The German DAX and the benchmark Stoxx 600 were down 0.6% led by mining stocks. Shares with high exposure to the Chinese economy also traded sharply in the red after Evergrande filed for bankruptcy in the US due to contagion from developers' credit risks triggered by profit warnings and Country Garden's failure to pay bond coupons. For the week, the German index fell over 2% and the pan-European index lost about 1.5%.While The FTSE 100 index held early losses and closed 0.6% lower at 7,265 on Friday, notching its sixth consecutive loss and a 3.3% drop on the week as markets continued to fret
The Nikkei 225 Index fell 0.55% to close at 31,451 while the broader Topix Index dropped 0.7% to 2,237 on Friday, with both benchmarks finishing the week sharply lower, as investors reacted to data showing Japan’s headline inflation rate came in above forecasts in July. Meanwhile, the core inflation print slowed as expected, but remained above the Bank of Japan’s 2% target. Japanese shares also tracked losses on Wall Street this week amid renewed concerns that the US Federal Reserve could keep interest rates higher for longer due to upside risks to inflation. Heavyweight consumer-related and financial stocks led the decline, with losses from Fast Retailing (-1.2%), Sony Group (-1%), Toyota Motor (-1.2%), Mitsubishi UFJ (-0.4%), Sumitomo Mitsui (-0.5%) and Tokio Marine Holdings (-0.3%).
The Shanghai Composite fell 1% to close at 3,132 while the Shenzhen Component dropped 1.75% to 10,459 on Friday, as investor sentiment took a hit after Chinese real estate giant Evergrande filed for protection from creditors in a US bankruptcy court. The benchmark indexes also declined for the second straight week as the absence of meaningful measures from Beijing to support China’s faltering economy disappointed markets. Meanwhile, Chinese Premier Li Qiang said on Wednesday the government would work to achieve its economic targets for this year, calling for expanding domestic demand and boosting consumption. All sectors declined on Friday, with sharp losses from heavyweight firms such as The Pacific Securities (-2.1%), Wuliangye Yibin (-2.8%), Kunlin Tech (-7.8%), Zhongji Innolight (-4.3%), Inspur Electronic (-3.7%) and ZTE Corp (-3.5%).
The BSE Sensex held early losses and closed 180 points lower at 64,950 on Friday, notching a 0.6% loss on the week and tracking the risk-off sentiment for Asian equities as Chinese property developers continued to flag warnings of losses, risking further credit defaults and raising concerns of financial instability at a large magnitude. It was the fourth consecutive weakly loss, the longest streak in 15 months, dragged by stocks with large exposure to international clients in the tech sector. Besides the deteriorating international backdrop, soaring food inflation domestically along with a plunging rupee and higher energy prices extended bets on how long the RBI will keep its terminal rate for. TCS, Wipro, Tech Mahindra, and Infosys all sank between 2% and 1.2%.
