European stocks continue to slide, Credit Suisse hits record low

European stocks continue to slide, Credit Suisse hits record low

By Shreeshi Sanyal and Yohan M Cherian

(Reuters) – European shares extended their declines on Friday, dragged down by Credit Suisse, as a batch of data pointing to an economic slowdown in the region added to concerns about the Fed’s optimism.

The European index was down 0.4%, as of 0806 GMT, hovering near 20-month lows and set to end the second week in a row lower with a 2.6% drop.

Banking shares fell 0.6 percent, with Credit Suisse losing 6 percent to a record low.

Two people familiar with the matter said the Swiss bank has looked to investors for fresh money, approaching them for the fourth time in nearly seven years as it tries to overhaul the investment bank.

However, Europe’s banking index was set to sharply outperform the benchmark STOXX 600 in September on the sector’s bets boosted by the high interest rate environment.

Interest rates rose sharply during the week, with the Federal Reserve raising its third consecutive hike by 75 basis points on Wednesday and Switzerland exiting the era of negative interest rates on Thursday.

The Bank of England (BOE) raised interest rates by a whopping amount this week, while the European Central Bank (ECB) earlier this month raised rates by 75 basis points.

β€œIf you look at the major major events this week from the Federal Reserve, the Bank of England, and central banks across Europe, they have been on a wave of rate hikes,” said Stuart Cole, chief macro economist at Equiti Capital.

β€œWe have also received comments from the European Central Bank that they will have to raise interest rates in the future and the market expects at least another 50 basis point hike while they are concerned about the risk of a recession.”

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Big Data Day

A survey showed that the slowdown in business activity across the euro zone deepened this month and the economy is likely to enter a recession as consumers rein in spending amid the cost of living crisis.

The index fell after a survey showed that the slowdown in German business activity deepened in September as rising energy costs affected Europe’s largest economy.

The French economy performed better than expected in September, as activity in the dominant services sector accelerated. However, the manufacturing sector contracted from the previous month. Paris shares fell 0.1 percent.

The Spanish statistics agency reported a better-than-expected economic growth figure of 1.5% for the second quarter. And in Spain it fell 0.6%.

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