Markets

European Stocks Close Lower as Omicron, Inflation Worries Weigh on Sentiment

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  • The omicron variant is spreading at an alarming rate, with countries across Europe implementing containment measures in a bid to avoid a tsunami of cases.
  • European stocks are coming off a strong day as investors reacted positively to central bank monetary policy decisions.

LONDON — European markets pulled back on Friday as concerns persisted about the spread of the omicron Covid-19 variant and the inflation outlook.

The pan-European Stoxx 600 closed down by 0.5%, with autos slipping 2.5% to lead losses as most sectors and major bourses slid into the red.

European markets have all but given back Thursday's gains, when investors reacted positively to central bank policy decisions. The Federal Reserve on Wednesday announced that it would be aggressive on tapering bond purchases and sees several rate hikes in 2022.

The Bank of England followed suit by hiking interest rates for the first time since the start of the pandemic, citing a strong labor market and the need to return inflation towards its 2% target. November's reading came in at a 10-year high of 5.1% annually.

The European Central Bank struck a more dovish tone, further cutting its pandemic-era bond buying program but vowing to stay accommodative through 2022 and beyond.

However, with inflation running at more than double target in the U.S., euro zone and the U.K., concerns are lingering as to whether it can be brought under control.

Meanwhile, the omicron variant is spreading at an alarming rate, with countries across Europe implementing containment measures in a bid to avoid a tsunami of cases. The U.K. reported over 90,000 cases in a single day on Friday, but daily deaths remain relatively stable for now.

On Wall Street, stocks continued to slide Friday, with the major averages on track for a losing week.

On the data front, a monthly survey from Germany's Ifo Institute showed sentiment in Europe's largest economy sliding in December, with the business climate index falling to 94.7 from 96.6 in November, below a consensus forecast of 95.3.

In terms of individual share price movement, Italian biotech firm DiaSorin saw its shares slide more than 10% to the bottom of the Stoxx 600, as investors balked at its 2022-2025 business plan.

At the top of the index, Just Eat Takeaway.com shares climbed over 4% after Bloomberg reported activist investor Cat Rock has increased its stake in the Anglo-Dutch food delivery firm.

Meanwhile, French petroleum company Rubis climbed 4.7% after acquiring solar energy group Photosol in a bid to speed up its transition to renewables.

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- CNBC's Ryan Browne contributed to this report.

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