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European shares fall on concerns over economic slowdown

written by Bella Palmer

The STOXX 600 index was down 0.6%, hitting its lowest level since Oct. 3

European shares fell for a fourth straight session on Monday, dragged by escalating Ukraine-Russia tensions and central banks' resolve to tame inflation at the risk of causing an economic slowdown and denting corporate profits.

The region-wide STOXX 600 index was down 0.6% by 0813 GMT, hitting its lowest level since Oct. 3.

Geopolitical tensions increased as Russia bombed cities, including Kyiv, across Ukraine on Monday in apparent revenge strikes after President Vladimir Putin declared an explosion on the bridge to Crimea to be a terrorist attack.

The fact that there's going to be increased military action will only increase those concerns about how the conflict is going to end. Investors are incredibly worried about what happens next, how it will impact the supply chain, and how it might further impact the energy crisis, said Danni Hewson, a financial analyst at AJ Bell.

You have got that backdrop at a time when we have huge concerns about economic growth, about the measures that central banks are having to take in order to tame inflation. There are concerns that the cure is going to be worse than the disease which is why we are seeing such subdued trading on markets, Hewson said.

The STOXX 600 index has fallen more than 3% in four sessions on worries that major central banks, especially the U.S. Federal Reserve, will continue to raise interest rates aggressively to rein in inflation.

Those fears were fanned after data on Friday showed resilience in the U.S. jobs market in September, dousing hopes of a Fed pivot anytime soon.

European Central Bank (ECB) member and Bank of France head Francois Villeroy de Galhau told France Culture radio on Monday that the ECB is engaged in bringing down inflation to 2% in ‘two to three years’ from now.

The French central bank also trimmed its economic growth estimate for the country, owing to poor industrial activity. France's CAC 40 index dipped 0.8%, the most among regional indexes.

China-exposed European luxury companies Burberry, Kering, LVMH, Hermes and Richemont slid between 2% and 2.7% as Chinese holiday spending slumped and domestic COVID-19 situation worsened over the National Day Golden week.


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