Europe midday: Stocks weaker across the board, oil falls for third day

(Sharecast News) - European stocks had extended losses by Friday lunchtime, with all major indices across the region posting moderate declines as investors took a breather following a tumultuous week for financial markets worldwide.

"Revived hopes for a resolution to the crisis in the Middle East have helped sustain a recovery in global equities, but European stocks took a pause for breath on Friday," says AJ Bell investment director Russ Mould.

The Stoxx 600 pan-European benchmark was around 0.5% lower at 639.36 by the midday mark, with losses of 0.7% seen across London, Frankfurt and Paris, 0.8% falls in Milan and Madrid, and little change in Zurich.

Not even a third straight decline in the price of oil was enough to lift sentiment, with supply disruption fears still keeping markets on edge as work continues to restore Saudi Arabia's East-West pipeline. The 1,201-kilometre-long pipeline was badly damaged by a strike last week, which raised concerns about extended disruptions to Saudi supplies. Brent crude was down 2.0% at $102.74 a barrel, after having come close to the $110 mark at the start of the week.

Overnight, the Bank of Japan raised its key interest rate for the second time in three months, lifting it 25 basis points to 1.25%, its highest since 1995. The central bank also suggested that more hikes were on the way, with underlying inflation fast approaching its target.

The Bank of England on Thursday decided to stand pat on monetary policy, though the Federal Reserve on Wednesday evening hiked rates for the first time in three years.

In equity news, major listed energy producers were all tracking the price of oil lower, including Repsol, Shell, BP, Eni and Equinor.

Telecoms stocks were also out of favour, including Deutsche Telekom, Airtel Africa, BT and Orange. Airtel Africa was down nearly 10% in London on reports that its Airtel Money division is reportedly considering raising less money than previously sought in the company's initial public offering.

In contrast, chip stocks were continuing to recover after their recent sell-off tied to fears of a slowdown in the AI sector, with semiconductor manufacturers Infineon, Aixtron and ASML all performing well.

Meanwhile, Nestle was under pressure after Russia seized control of its assets in the country, where it was last reported to have six factories. "Nestle is committed to taking all necessary steps to protect its rights and ensure continuity of business operations in the interests of all stakeholders, particularly its employees," the company said.

In economic news, German wholesale inflation surged to an annual rate of 4.6% in August, up from 3.0% in July and well ahead of the 4.1% consensus forecast, marking the highest rate since April 2023.

UK retail sales unexpectedly bounced back in August, helped along by the warm weather, according to figures released by the Office for National Statistics. Sales rose 0.5% on the month following a 0.5% decline in July, beating expectations for a 0.2% fall.