Europe stocks mark biggest weekly drop in almost a year as Middle East conflict persists

[BENGALURU] Europe’s Stoxx 600 marked its biggest weekly drop in close to a year on Friday (Mar 6) as the Middle East conflict showed no signs of abating, while an unexpected decline in US jobs clouded the outlook for interest rate cuts.The pan-European benchmark was down 1 per cent, at its lowest level in more than two months. It shed 5.5 per cent this week. Major bourses in Frankfurt and Paris marked their sharpest weekly declines since April last year, while stocks in Madrid had their biggest weekly drop in four years.US President Donald Trump demanded Iran’s “unconditional surrender” in an escalation of demands a week into the Middle East war, which could make it more difficult to negotiate a swift end to it.Banks came under pressure again. They lost 1.7 per cent, coming close to a three-month low. HSBC and Allianz fell 2.6 per cent and 1.6 per cent, respectively.Healthcare companies followed with a 1.6 per cent slide, bruised by Zealand Pharma’s 36 per cent slump and Roche’s 2.9 per cent dip after the mid-stage trial results for its experimental obesity treatment fell short of investor expectations.Meanwhile, data showed the US economy unexpectedly shed jobs last month and the unemployment rate increased, potentially hinting at a deterioration in labour market conditions.The data comes at a time when global central banks are exercising caution over their approach to monetary policy as oil prices hit multi-month highs.“It puts the Fed in a difficult position, especially as the spike in oil prices adds near-term inflation pressure ... with global geopolitical uncertainty elevated, it is reasonable to expect that job growth may remain subdued in the months ahead,” said Angelo Kourkafas, senior global strategist at Edward Jones.However, policymakers at the European Central Bank played down the need for swift action to combat the situation, even as Europe remained heavily dependent on oil imported via the Strait of Hormuz.“Europe is a bit more exposed to higher oil prices and there’s some concerns that we will see a stagflationary environment,” said Ciaran Callaghan, head of European equity research at Amundi.The energy index on the Stoxx 600 was the only one that closed higher on the day, up 0.8 per cent.Defence companies edged higher on prospects of more demand for weapons. Rheinmetall and Leonardo rose 2.9 per cent and 3.4 per cent respectively, while the broader index added 1 per cent.Europe’s fear gauge, the Stoxx volatility index, spiked to its highest level since April earlier in the week and remained elevated on Friday.Among other stocks, Sectra jumped 14 per cent, topping the Stoxx 600 after the medical imaging IT firm reported a rise in third-quarter profit.Universal Music Group, the world’s biggest music label, fell 8.1 per cent following a decline in net profit attributable to shareholders. It also put plans for a stock market listing in the US on hold. REUTERS