European markets extended losses on Friday, as a renewed fall in the price of oil, upcoming risk events and economic growth concerns weighed on sentiment, sending investors in search of safe haven assets which sent European government bond yields towards record lows.
The pan-European STOXX 600 was off 1.82 percent in morning trade, with all sectors posting sharp losses.
Europe followed Asian markets lower on the last trading day of the week. Markets in Asia were mostly in the red, tracking declines in U.S. markets that followed a drop in crude oil prices.
On the oil front, prices slipped deep into negative territory as a stronger dollar capped gains in the market; however prices still held around and above $50, on the back of supply outages and strong refinery demand.
In European morning trade, Brent and U.S. WTI extended earlier losses, trading around $51.20 and $49.75 per barrel, respectively. Most oil majors including Total, BP and Royal Dutch Shell were posting declines during trade.
Investor sentiment has been dented by a number of factors such as concern over the health of the global economy, the upcoming Brexit vote, as well as warnings from senior policy makers on the economy. An interest rate hike in the U.S., which a few weeks back had been expected by some market participants in June, has been pushed back.
As a result, investors have taken money out of stocks and put them into safe haven assets. Germany’s 10-year bund yield is hovering near record lows with a zero yield not far off.
Elsewhere, the Russian central bank cut its key interest rate to 10.5 percent from 11 percent.
In individual stock news, the British retail space was at the top of traders’ minds on Friday. U.K. supermarket Tesco confirmed that it was selling its 95.5 percent controlling stake in Turkish grocery business Kipa, to Migros. In a separate transaction, the retailer also revealed it is to sell its Giraffe restaurant chain to Boparan Restaurants Holdings Limited. Shares of Tesco were in the red.
Meanwhile, retail rival Home Retail—which is being acquired by J Sainsbury—announced that its chief executive is to step down when the takeover is finished. The chief financial officer of Sainsbury’s, John Rogers, is expected to then take up the CEO position of Home Retail. In trade, Sainsbury’s slipped 1.5 percent while Home Retail also fell.
Meanwhile, Lufthansa was near the bottom of Europe’s benchmarks, off more than 4.5 percent, after the airliner announced that its CFO Simone Menne would step down at the end of August to pursue other career options. Air France-KLM was also sharply lower after RBC cut its price target on the stock.
Recruitment companies Hays and PageGroup were some of Europe’s worst performers, off over 5 percent each, after Deutsche Bank cut its price target on both stocks, and reduced each one’s rating to “sell”.
Following on from the sharp declines seen on Thursday, Essentra fell some 5 percent after Numis, Citigroup and JPMorgan cut their price target on the stock.
The Peugeot family is hoping once again to take control of the PSA Group, according to a Les Echos interview with former chairman Thierry Peugeot and other members of the group. Shares of Peugeot Citroen were off 2 percent, while the sector fell almost 2 percent.
Elsewhere, concerns over Europe’s economic state continue to linger. Bundesbank President Jens Weidmann said investors could get more and more nervous if the European Central Bank’s ultra-low rates stay in place for an extended period, increasing the chance of a sudden increase in risk premia, Reuters reported.
This comes just a day after ECB president Mario Draghi warned of “lasting economic consequences” of years of weak output and stagnation; adding that euro zone leaders needed to do their part to confront their own economic issues. Banks in general were under-performing on Friday, off over 2 percent.
In other news, investors will be keeping an eye out on the Russian central bank, as it releases its latest interest rate decision at 11.30 am UK time.
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