Europe close: Stocks dragged down by concerns over inflation, rising bond yields
European shares finished lower as concerns that higher near-term inflation and rising government bond yields might eventually sap the strength in equities, although not all analysts were of that view.
On that note, US retail sales for January surprised strongly to the upside, surging by 5.3% versus December.
Related to the above, and in the case of US equities, Citi's Tobias Levkovich said on Wednesday that a correction on Wall Street was "very likely" now that the risk-reward on offer in the stockmarket had turned neutral, although worse was unlikely.
The pan-European Stoxx was down 0.74% at 416.1, alongside a 0.56% drop for London's FTSE 100 to 6,710.9 as official data showed a slightly higher-than-expected rise in January inflation.
Germany's Dax was knocked 1.1% lower to 13,909.27 while Milan's FTSE Mibtel gave back 1.12% to 23,178.56.
"The market rally has been built on the twin pillars of low interest rates and fiscal stimulus," said IG chief market analyst Chris Beauchamp.
"Rising rates pose a risk to the former, in the unlikely event the Fed decides to alter its 'lower for longer' approach, while the stronger retail sales data, likely a one off, upsets the idea that the economy is in need of more assistance."
Data released earlier by the Office for National Statistics showed that consumer price inflation rose to 0.7% in January from 0.6% in December, with food and household goods the main drivers. Analysts had been expecting a nudge lower to 0.5%.
Investors are also keeping a wary eye on commodity prices, where copper and crude oil have made sharp gains, with oil prices up more than a fifth since the start of the year.
In equity news shares in luxury goods maker Kering slumped 7.15% after sales at its Gucci brand fell more than expected.
Kering, which also owns the Saint Laurent brand, said revenue for the whole group fell 8.2% in the fourth quarter.
Investment platform Hargreaves Lansdown plunged 6.87% in response to Tuesday’s post-close announcement that co-founder and ardent Brexiteer Peter Hargreaves had offloaded 18m shares in the company worth around £300m.
Shares in British American Tobacco fell 3.95% as the prospect of mid-single figure earnings growth for 2021 countered a 10% rise in 2020 profit.
The Lucky Strike and Camel maker reported a 10% rise in pre-tax profits to £8.7bn in 2020. On an underlying basis, pre-tax profits lifted 1% to £10.2bn.
On the upside, shares in Swedish cloud computing services provider Sinch soared 12% as the company agreed to buy US communications company Inteliquent for $1.14bn in cash.
Sinch shares have nearly tripled over the past year on the back of the work-from-home trend prompted by the Covid-19 pandemic. The company said it expected the transaction to close in the second half of the year.
Rio Tinto dipped even after the mining giant delivered a record dividend to shareholders as soaring iron ore prices and demand from China drove full-year profits sharply higher. Miners more generally were on the rise, with Antofagasta, BHP and Anglo American also higher.