European shares fall for fourth day on growth worries

By Amruta Khandekar and Bansari Mayur Kamdar

(Reuters) -European shares fell for a fourth straight session on Wednesday, with investors on edge as global recession fears grew, but losses were limited by gains in healthcare stocks.

The region-wide STOXX 600 closed 0.6% lower, taking cues from Wall Street declines overnight after big U.S. banks cautioned of a likely recession next year.

“There is a sense of nervousness and jitteriness in the markets today,” said Victoria Scholar, head of investment at Interactive Investor, citing more volatility as the year-end approaches.

“Markets are not out of the woods yet with headwinds remaining from the gas crisis, inflation, monetary tightening and the threat of recession.”

A recent stock rally driven by hopes of a less aggressive Federal Reserve has been tested in recent days after strong U.S. economic fuelled fears that the central bank could keep hiking interest rates for longer.

Markets now await a slew of interest rate decisions, including from the Fed and European Central Bank next week, for further clues on the direction of monetary policy.

On the pan-continent STOXX 600 index, energy stocks led declines, falling 2.0% as crude prices slid after U.S. data showed an unexpectedly large build in fuel stocks, feeding fears about demand in a market already spooked by an uncertain economy.

Banks fell for their third straight session, also weighing on the STOXX 600.

Euro zone government bond yields hit fresh multi-week lows amid conflicting signals about when inflation will peak.

A survey showed rising inflation expectations for the year ahead but expectations for three years ahead were unchanged at 3.0%, well above the ECB’s 2% target.

Healthcare shares rose 0.7%. GSK Plc and Sanofi jumped 7.5% and 6.1% respectively, boosting the index after the drugmakers on Tuesday were spared thousands of U.S. lawsuits claiming that the heartburn drug Zantac caused cancer.

Airbus fell 2.2% as the world’s largest planemaker abandoned a numerical forecast for jet deliveries and a date for its key production goal.

Euro zone gross domestic product grew slightly more than initial estimates, Eurostat data showed, with household spending and business investment propping up the economy.

(Reporting by Amruta Khandekar and Bansari Mayur Kamdar; editing by Uttaresh.V, Rashmi Aich and Richard Chang)