European stocks rise as investors look to steady utilities

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European stocks rose at the open on Friday, looking to end a seven-day losing streak, as investors turned to defensive stocks like utilities amid signs of a global economic downturn.

Europe’s region-wide Stoxx Europe 600 rose 0.3 per cent at the opening bell, but remained on track to end the week almost 1 per cent lower. France’s Cac 40 and Germany’s Dax also added 0.3 per cent on Friday. 

The region was buoyed by utility stocks, up 0.3 per cent, as they tend to be less sensitive to changes in the economic cycle and so become more attractive when investors expect growth to slow.

Signs that the European economy was flagging came into focus earlier this week when a string of data releases pointed to weakness in the region’s service and construction sectors, more than a year after the European Central Bank started to raise interest rates. 

The majority of investors believe that the data-dependent central bank will hold back from further tightening at its upcoming policy meeting next week, but some bet it still has more rate rises in stall by the end of this year.

“We do not think the ECB will want to ‘shock’ the market, particularly against a backdrop of weakening economic data,” said Paul Hollingsworth, chief European economist at BNP Paribas.

Yields on the policy-sensitive two-year German Bund slipped 0.11 percentage points to 3.08 per cent, while those on the 10-year Bund, a regional benchmark in Europe, fell 0.01 percentage points to 2.61 per cent. Bond yields fall as prices rise. 

Adding to the pool of bleak economic indicators this week, Chinese data revealed that exports and imports continued to fall in the world’s second-largest economy, while the service sector weakened.

Asian equities declined on Friday, with falls in tech stocks dragging the benchmark CSI 300 0.5 per cent lower. Japan’s Topix fell 1 per cent and South Korea’s Kospi index was flat. Hong Kong markets shut due to bad weather.

Apple supplier TSMC, the world’s biggest contract chipmaker, saw its shares drop 0.6 per cent a day after the tech sector sold off sharply in the US and China, following reports that Beijing had banned central government officials from using iPhones for work.

The shares of South Korea’s SK Hynix slid 4.1 per cent after the chipmaker opened an investigation into the use of its product in the latest phone from Huawei.

Following an overnight sell-off on Wall Street, futures contracts tracking the benchmark S&P 500 and those tracking the tech-focused Nasdaq 100 rose 0.2 per cent ahead of the New York open.

Meanwhile, oil prices steadied after rising sharply earlier this week, when Saudi Arabia and Russia announced they will extend supply cuts until the end of year, boosting investors’ concerns over rising price pressures.

Brent crude traded up 0.1 per cent at $90.03 a barrel. The US equivalent West Texas Intermediate, traded flat at $86.84 a barrel.

Analysts do not “expect oil prices to drift too much upwards in the context of an overall slowdown in economic growth [ . . . ] and with the Chinese economy struggling to meet its growth targets”, according to Nadège Dufossé, global head of multi-asset at Candriam.