Europe close: Stocks fall as telecoms firms retreat; central bank decisions in focus

(Sharecast News) - European stocks ended firmly in the red on Friday as investors took a breather following a tumultuous week for financial markets worldwide, which saw rate decisions from the Federal Reserve, the Bank of England and the Bank of Japan. The benchmark Stoxx Europe 600 index ended down 1.1% at 635.45, while Germany's DAX fell 1.6% to 25,304.06 and France's CAC 40 declined 1.5% to 8,065.02.

"Revived hopes for a resolution to the crisis in the Middle East have helped sustain a recovery in global equities, but European stocks took a pause for breath on Friday," said AJ Bell investment director Russ Mould.

Not even a third straight decline in the price of oil was enough to lift sentiment, with supply disruption fears still keeping markets on edge as work continues to restore Saudi Arabia's East-West pipeline. The 1,201-kilometre-long pipeline was badly damaged by a strike last week, which raised concerns about extended disruptions to Saudi supplies.

Overnight, the Bank of Japan raised its key interest rate for the second time in three months, lifting it 25 basis points to 1.25%, its highest since 1995. The central bank also suggested that more hikes were on the way, with underlying inflation fast approaching its target.

The Bank of England on Thursday decided to stand pat on monetary policy, though the Federal Reserve on Wednesday evening hiked rates for the first time in three years.

In equity news, major listed energy producers were all tracking the price of oil lower, including Repsol, Shell, BP and Eni.

Telecoms stocks were also out of favour, including Deutsche Telekom, Airtel Africa, BT and Orange. Airtel Africa tumbled on reports that its Airtel Money division is considering raising less money than previously sought in its initial public offering.

In contrast, chip stocks were continuing to recover after their recent sell-off tied to fears of a slowdown in the AI sector, with semiconductor manufacturers Infineon, Aixtron and ASML all performing well.

Meanwhile, Nestle was under pressure after Russia seized control of its assets in the country, where it was last reported to have six factories.

In economic news, German wholesale inflation surged to an annual rate of 4.6% in August, up from 3.0% in July and well ahead of the 4.1% consensus forecast, marking the highest rate since April 2023.