European stocks reverse gains to close lower amid inflation jitters; Rubis down 8%

Key Points
  • The pan-European Stoxx 600 fell 0.3%, after having climbed earlier in the day, wrapping up the week in the red.
  • Traders continued to digest the European Central Bank's decision to slow down bond buying under its pandemic stimulus program.
  • U.S. producer prices for August rose 8.3% on an annual basis, the biggest advance on record since at least 2010.

LONDON — European stock markets closed lower on Friday, reversing earlier gains, as traders weighed concerns over rising inflation and central bank action.

The pan-European Stoxx 600 closed down 0.3%, after having climbed earlier in the day. The benchmark also finished the week in the red, falling 1.2%. Utilities shares led the losses Friday, down 1.3%.

European investors continued to digest the European Central Bank's decision on Thursday to slow down bond buying under its pandemic emergency purchase programme (PEPP) in response to higher inflation and stronger GDP growth across the euro zone. The ECB also modestly revised up its medium-term inflation forecasts.

"We counted at least four decisions which we will have to come back in December for, on top of the pace of PEPP for Q1 2022: the future of PEPP beyond March (wind down the programme or extend it, and what to do with the 'normal' QE programme APP), a possible new round of cheap loans to the banks (TLTROs) and possible technical adjustments to the asset purchase programmes to ensure it can last for longer," said HSBC economists Simon Wells and Fabio Balboni.

"For now, the relatively dovish upward revision to the inflation forecast should reassure markets that more support is coming."

Shares in Asia-Pacific rose on Friday as Hong Kong-listed stocks affected by China's regulatory crackdown bounced back, after potential further action from Beijing on gaming companies was revealed to not be as harsh as first reported.

On Wall Street, stocks declined for a fifth straight day as traders digested fresh inflation data. The U.S. August producer prices index showed wholesale costs for businesses rose 8.3% on an annual basis, its biggest advance on record since at least 2010. The more important consumer price index for August will be released on Tuesday.

ECB may have been 'too pessimistic' to begin with, Lagarde says

Meanwhile, Germany's finance and justice ministries were raided on Thursday as prosecutors investigate the government's anti-money laundering agency, casting doubt over failings to tackle financial crime in Europe's largest economy.

On the data front, the U.K. economy rose just 0.1% in July, official statistics showed on Friday, as the spread of the delta variant of Covid-19 slowed economic activity to a trickle after the easing of lockdown measures.

The final German harmonized consumer price index (CPI) grew 0.1% month-on-month in August, marking a 3.4% annual increase.

In terms of individual share price movement on Friday, French IT firm Atos climbed 5.8% to lead the Stoxx 600.

At the bottom of the index, French petroleum firm Rubis fell 8% after problems in the Caribbean region weighed on its otherwise improving first-half earnings.

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- CNBC's Ryan Browne contributed to this report.