European shares ease from 3-week high as Powell stamps out rate peak hopes

By Ankika Biswas

(Reuters) -European shares fell on Friday, hurt by higher bond yields, as hawkish comments from the U.S. Federal Reserve Chair poured cold water on investor optimism around a peak in interest rates.

The pan-European STOXX 600 fell 0.8% by 0915 GMT, easing from a three-week high hit on Thursday.

However, it remained poised for a second weekly gain, helped by a handful of upbeat earnings.

Basic resources and real estate were the worst weekly sector performers, while media and industrials were the focus of investors’ buying spree.

Fed officials including Chair Jerome Powell on Thursday expressed uncertainty on their battle against inflation and added that they would tighten policy further, if needed.

“Markets are sort of focusing on the more hawkish messaging from Powell, but he just stressed there could be further hikes, nothing different from what he has said before,” said Giles Coghlan, chief market analyst at brokerage GCFX.

The comments follow European Central Bank and Bank of England policymakers also recently pushing back against expectations around rate cuts.

On the earnings front, Richemont slid 6% after the Swiss luxury group reported weaker-than-expected earnings, pulling down rivals LVMH, Kering and Hermes between 1.4% and 3.3%.

The luxury sector dropped 2.6%, on track for its worst day in a month.

Diageo tanked 12.8% as the Johnnie Walker whisky maker expects organic operating profit growth to decline in the first-half of its current financial year, dragging the food and beverage sector index down nearly 3%.

Scor lost 8.9% after the French reinsurance company’s third-quarter net income missed expectations.

On the flip side, GN Store Nord jumped 10.8% to top the STOXX 600 as the Danish hearing aid and audio solutions maker targeted further cost savings from its reorganisation, after in-line third-quarter results.

Allianz rose 2.5% after the German insurer reported better-than-expected third-quarter results and confirmed its full-year profit forecast.

Investors also sized up economic data amid growing evidence of an impending recession.

Fresh data showed Italian industrial output was flat in September month-on-month, reflecting overall weakness in the euro zone’s third largest economy.

(Reporting by Ankika Biswas in Bengaluru; Editing by Varun H K and Sonia Cheema)