Europe Markets

European markets close lower as investors monitor omicron, central bank moves

Key Points
  • The pan-European Stoxx 600 fell 0.7%, having given back earlier gains of around 0.6%.
  • Investors are focusing on decisions from several major central banks this week.
  • Inflation remains a key concern, with data showing U.S. prices surging in November.

LONDON — European stocks fell for a fifth consecutive session Tuesday, with sentiment remaining negative amid the continuing spread of the omicron Covid variant.

European markets

The pan-European Stoxx 600 closed down by 0.7% provisionally, having given back earlier gains of around 0.6%. Tech stocks dropped 2.1% to lead losses as most sectors and major bourses dipped into the red.

European stocks slipped Monday as traders reacted to developments regarding the omicron Covid variant. U.K. Prime Minister Boris Johnson confirmed that at least one patient infected with the new omicron variant of Covid-19 has died in the country.

Mainland China reported its first case of the omicron Covid variant Monday in the city of Tianjin, about a two hours' drive from capital Beijing.

Investors are also focused this week on central bank action with the U.S. Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank all due to announce monetary policy decisions.

Former Fed governor: U.S. must step back on spending and find source of inflation
Former Fed governor: U.S. must step back on spending and find source of inflation

The Federal Reserve's two-day policy meeting begins Tuesday where policymakers are expected to discuss speeding up the end of its bond-buying program.

The meeting comes as inflation, released last Friday, showed consumer prices climbing by 6.8% in November year-over-year for the biggest surge since 1982. The print was marginally higher than the 6.7% Dow Jones estimate.

The market's inflation woes were further compounded Tuesday by the November producer price index, which showed a year-over-year increase of 9.6%. That's the fastest pace on record and above expectations.

On Wall Street, U.S. stocks slipped as traders digested the latest inflation numbers and awaited the Fed's decision, which is due Wednesday.

Back in Europe, U.K. employment data remained strong in November, with 257,000 staff added to payrolls, indicating that the end of the government's furlough scheme has gone smoothly.

"Without the recent emergence of the Omicron variant, today's U.K. labour market report would likely have been enough to convince the Bank of England to hike interest rates at Thursday's meeting," said Hugh Gimber, global market strategist at JPMorgan Asset Management.

"Sadly, Covid-19 is yet again confusing matters. With Omicron posing near-term risks to the growth outlook, and still much to learn about the real-world efficacy of vaccines, we expect policymakers to instead opt to keep rates on hold this week in the hope that the outlook has become clearer by February."

Deals in focus

In terms of individual share price movement, Vifor Pharma shares surged 12.6% after Australian biopharmaceutical giant CSL offered to by the Swiss company for $11.7 billion.

British online supermarket Ocado climbed 5.5% after a strong earnings report and a victory in a patent infringement law suit against Norwegian robotics company Autostore.

At the bottom of the European blue chip index, Rentokil shares fell 12.3% after the British pest control company agreed a $6.7 billion deal to buy U.S. rival Terminix.

Britain's BT Group slid 4.3% after Altice U.K., the telecoms investment company controlled by French billionaire Patrick Drahi, increased its stake in the company from 12.1% to 18%.

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— CNBC's Ryan Browne contributed to this report.