Investing.com – European shares slid on Friday as intensifying military exchanges in the Middle East drove up oil prices and stoked global inflation fears, though a strong start to the corporate earnings season cushioned the decline and kept indexes on track for modest weekly gains.
The pan-European index fell 0.6% in early morning trade, but remained poised to eke out a 0.4% gain for the week. Robust corporate updates, particularly from heavyweight banking lenders, provided a vital buffer to the broader market and lifted exposed indices earlier in the week.
Market sentiment was tested as Washington and Iran traded military strikes for a sixth consecutive day. The escalation triggered a sharp spike in , reviving concerns that sticky energy prices could disrupt the global disinflationary trend and complicate major central banks’ monetary policy paths.
However, losses in Europe were far more contained compared to a steep technology-led rout in Asian markets overnight, reflecting the European region’s lower concentration of megacap tech firms.
fell 5%, while fell 3.5%.
Investors appeared to be displaying some degree of resilience to the geopolitical noise out of the Middle East, preferring to focus on a fundamentally solid start to the second-quarter corporate reporting cycle. Cooling U.S. inflation data earlier in the week also took the edge off immediate global interest rate anxieties.
Attention is now shifting to the European Central Bank’s monetary policy meeting scheduled for next week.
While a growing majority of economists expect the central bank to maintain its current benchmark deposit facility rate, the recent surge in oil prices has prompted money markets to adjust their models, factoring in an increased probability of a later rate hike.
Policymakers face a delicate balancing act between soft regional economic growth and potential supply-side inflationary shocks.
Across regional bourses, London’s dipped 0.3% on the day but remained on track for a weekly gain, buoyed by major banking stocks.
In Paris, the lost 0.6% in early deals, tracking broader eurozone sentiment, while Frankfurt’s edged down 0.5%. Southern European markets also faced pressure, with Milan’s and Madrid’s dropping 1% and 0.3% respectively, hit by broad risk-off flows.
Among individual stocks movers, fell 2.5% after posting quarterly results.