Volatile week as investors assessed recession prospects

LONDON — European markets moved higher on Friday to end a volatile week, as investors around the world assessed inflation and fears of an economic recession.

The pan-European Stoxx 600 index gained 0.8% in early trade, with tech stocks adding retail 1.5% to lead gains while stocks slid 1.8%.

In terms of individual share price movement, London-listed defense firm Ultra Electronics jumped more than 12% after the British government moved forward in the process of signing off a takeover of the company by rival Cobham.

At the bottom of the European blue chip index, German online retailer Zalando plunged more than 13% after issuing a profit warning for the second quarter, prompting a broad sell-off in retail stocks.

Central banks last week made aggressive moves to rein in inflation, and investors are now hopeful that rising consumer prices will be brought under control as commodities prices — notably oil and economic output bellwether copper — pulled back sharply in recent days. Energy and food have been the main drivers of inflation around the world.

However, this aggressive policy tightening path has stoked fears of a recession, which US Federal Reserve Chairman Jerome Powell told Congress on Wednesday was a “possibility” as he reiterated that the central bank is “strongly committed” to bringing down inflation.

Shares in Asia-Pacific were higher overnight, led by Hong Kong’s Hang Seng index and South Korea’s Kospi. Stateside, stock futures gained in early premarket trade on Friday as Wall Street looked to grind out a rare positive week amid a challenging first half of the year.

Economic data releases from Europe on Friday included UK retail sales for May, Spanish final first-quarter gross domestic product figures and Germany’s Ifo Institute’s economic sentiment surveys for June.

UK retail sales fell 0.5% month-on-month in May, slightly less than the -0.7% projected by economists in a Reuters poll, while April’s monthly rise in sales was revised down sharply from 1.4% to 0.4%.

UK consumer confidence fell to its lowest level since records began, new data from research company GfK revealed Friday, as the country faces inflation running at a 40-year high, slowing growth and a spiraling cost of living crisis for households.

British Prime Minister Boris Johnson suffered a double blow overnight as his ruling Conservative Party lost two key by-elections to the main opposition Labor Party and to the Liberal Democrats.

The defeats in the two constituencies at opposite ends of England — seen as a test of Johnson’s standing after the “partygate” scandal and amid the cost-of-living crisis — prompted the immediate resignation of Conservative Party Chairman Oliver Dowden.

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