European markets close lower as UK political chaos continues; retail stocks fall 3%

The European Stoxx 600 index closed Friday 0.6% lower, though the U.K.’s FTSE 100 bucked the trend with a 0.37% rise.

British politics saw a turbulent week, with a huge pivot on fiscal policy Monday, the resignation of the interior minister Wednesday and finally the resignation of the prime minister Thursday.

Sterling spent most of the day lower against the dollar, though swung back into positive territory shortly before 5 p.m.

Elsewhere in Europe, EU leaders continued debating how to tackle the bloc’s energy crisis, after Germany gave the green light for discussions around a price cap.

France’s CAC 40 closed down 0.84% and Germany’s DAX index fell 0.3%. Construction and telecoms stocks posted the biggest losses.

— Jenni Reid

The British pound fell 1.3% against the dollar to $1.108 in early afternoon trading, more than wiping out moderate gains it made on Thursday as Prime Minister Liz Truss stepped down.

Sterling was trading at $1.1074 at 1:20 p.m. London time, its lowest level since Oct. 12.

“The pound has been susceptible to the broad strength in ‘king dollar’ today and reaffirms our view that what we saw yesterday — and even the prospects of a Rishi Sunak leadership – is not ‘game changing’ to GBP markets,” Viraj Patel, senior strategist at Vanda Research, told CNBC.

“Overseas investors are likely to see this political volatility as another reason to get out of U.K. assets.”

Adidas’ losses have deepened to 12% during afternoon deals, with Puma following closely behind with a 9% drop in share price.

Swedish telecoms company Telia, meanwhile, slumped 9%. The company lowered its outlook for 2022 and 2023 on reporting third-quarter earnings.

— Hannah Ward-Glenton

Public sector borrowing reached £20 billion ($22.2 billion) in the U.K. in September, up from £11.8 billion in August, according to the Office for National Statistics.

It is the second highest September borrowing figure since monthly records began in 1993.

The figure is £5.2 billion more than the £14.8 billion originally forecast by the ONS.

— Hannah Ward-Glenton

Retail leads losses in the European markets this morning, down 2.9%.

Britain’s retail sales figures were lower than expected, down 1.4% in September according to the Office for National Statistics.

The figure is 1.3% below pre-Covid levels in February 2020.

Retailers continue to cite rising prices and the cost-of-living crisis for hampering sales. The death of Queen Elizabeth II in September also caused many retailers to close.

— Hannah Ward-Glenton

Shares of Adidas have dropped 7.2% in early trade after the company issued a 2022 profit warning.

Puma is also trading around 4% lower following the Adidas announcement.

— Hannah Ward-Glenton

The U.K.’s FTSE 100 is set to open 36 points lower at 6,905, according to data from IG.

Germany’s DAX is seen opening around 119 points lower at 12,636, France’s CAC is set to drop by 51 points to 6,026 and Italy’s MIB index is expected to fall around 205 points at 21,398.

— Hannah Ward-Glenton

“The macro picture is arguably more challenging than it has been for some time,” says Goldman Sachs, which is favoring a barbell strategy for the recession jitters.

The bank named several buy-rated stocks it thinks could do well against the current macro backdrop.

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— Zavier Ong

The U.S. 10-year Treasury yield moved up as high as 4.272%, after topping 4.2% for the first time since 2008.

The policy-sensitive 2-year Treasury yield also rose to 4.639%, at its highest levels in 15 years.

The yield on the 30-year Treasury soared to a new 11-year peak of 4.266%.

Yields and prices move in opposite directions and one basis point equals 0.01%.

–Jihye Lee