Europe midday: US recession fears push stocks lower
European shares extended losses as US policymakers flagged further rate rises this year, sparking fears of a recession in the world's biggest economy.
The pan-regional Stoxx 600 index was down 0.59% at 0840 GMT with all major bourses lower. US shares were also hit by data showed that domestic manufacturing output slumped last month and retail sales dropped by the most in a year.
"US recession fears are resurfacing as Federal Reserve policymakers flagged that more rate rises are ahead, even though inflation is coming down from dizzying heights and slowing activity is taking a toll on big companies," said Hargreaves Lansdown analyst Susannah Streeter.
"Remarks from Cleveland Fed President Loretta Mester crushed hopes that the hiking cycle may be shorter, with officials still largely indicating that rates are set to rise to 5.00%-5.25% in the months to come. Risks of a harder landing for the US economy are rising and big tech is bracing for impact."
Sentiment was also dampened overnight with news that tech giant Microsoft had become the latest in the sector to announce job cuts.
Meanwhile, Dutch central bank chief Klaas Knot said markets may be underestimating planned rate hikes by the European Central Bank and most of the remaining increases will be done in multiples of 50 basis points.
The ECB flagged a steady pace of 50 basis point rates hikes in the months ahead but investors have started to price out some of those moves, anticipating smaller increases and a lower peak in interest rates as inflation readings in economies such as Germany hinted that price rises may have peaked.
"It will not stop after a single 50 basis point hike, that’s for sure," Knot told CNBC, adding that investors should take more seriously its policy guidance. "Most of the ground that we have to cover, we will cover at a constant pace of multiple 50 basis points hikes."
"The sort of market developments that I've seen over the last two weeks or so, are not entirely welcome," Knot said after investors priced out some rate hikes. "I don't think that they are compatible, actually, with a timely return of inflation towards 2%."
In equity news, shares in iconic UK boot maker Dr Martens slumped by 25% as the company issued a profits warning, saying it had been hit by operational issues at its Los Angeles distribution centre and weaker trading in the US direct-to-consumer segment.
Weaker copper prices hit Antofagasta, Glencore and Anglo American, while oil giants BP and Shell were down as as crude prices retreated.
Swiss online pharmacy group Zur Rose outperformed the market, with the shares up more than 10% at on point as the retailer said it expected a smaller full-year core loss than previously forecast.
Informa gained as the UK academic publisher and events specialist said full-year numbers were set to come in ahead of expectations, following strong performances across the business.
Deliveroo shares were up as the online fast food delivery platform said it had broken even in the first half and expected better earnings margins for the full year.
Reporting by Frank Prenesti for Sharecast.com