European Stocks Fall, Finishing 2022 in the Red

European stocks declined on Friday, with investors continuing to approach the markets cautiously as the year filled with instability due to the Ukraine war, surging inflation, and tight monetary policy is brought to a close.

European equities are expected to record their worst year since 2018, with the pan-European STOXX 600 index on track to fall about 12% this year, its worst since posting a 13% annual loss in 2018.

Germany’s DAX index was down 0.6%, France’s CAC 40 shed 0.6%, and the UK’s FTSE 100 index dropped 0.3%.

European Stocks May Have a Challenging 2023

European stock markets may have a challenging start in the new year, as the European Central Bank (ECB) planned to continue hiking interest rates in the near term, keeping on its move to push inflation close to record levels.

The ECB’s decision could put the Eurozone on course to a recession early in 2023, while the Bank of England (BoE) said the UK economy is already experiencing what it has foreseen to be an extended recession.

Mortgage lender Nationwide Building Society stated on Friday that British house prices fell 0.1% in December, the longest slump since 2008 and the fourth consecutive monthly price slide. On an annual basis, the UK’s house price growth slipped 2.8% this month from 4.4% in November.

In Spain, preliminary data showed that the country’s consumer price index (CPI) was up 5.8% annually in December from 4.4% in November.

Investors are likely to monitor developments in China, a key export for European firms, as the world’s second-largest economy eases its stringent COVID testing and lockdown rules.

The move, however, has led to new cases of the virus in the country, raising concerns worldwide about the development of new variants. That prompted some countries, including the US and Italy, to implement mandatory testing and entry policies for travelers from China.

Activity in the Chinese economy may face difficulty in the near term before the outbreak is under control.