# European shares rebound with focus on Italian politics, earnings
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-15
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: European shares rebound as automakers and retail stocks
Meta Description: Get the latest update on European shares rebounding after a two-day rout, with insights on shifts in U.S. interest rates, Italy's political crisis, and more.
URL: https://financedigest.com/european-shares-rebound-with-focus-on-italian-politics-earningshtml

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By Susan Mathew

(Reuters) -Automakers and retail stocks on Friday led a rebound in European shares from a two-day rout that saw investors grapple with shifting expectations of U.S. interest [rate hikes](https://www.financedigest.com/hopes-of-slowdown-in-rate-hikes-bolster-shares-ahead-of-u-s-gdp.html "Hopes of slowdown in rate hikes bolster shares ahead of U.S. GDP"), a political crisis in Italy and recession risks.

Italian shares rose 1.4%, bouncing off 2-1/2 year lows [hit in the previous session as investors](https://www.financedigest.com/bayer-hits-8-month-high-as-investors-welcome-ceo-change.html "Bayer hits 8-month high as investors welcome CEO change") awaited further developments in a political crisis brewing in the country.

Italian Prime Minister Mario Draghi offered to resign after one of the parties in his fractious coalition [failed to back him in a confidence vote over his plan](https://www.financedigest.com/are-the-over-55s-accessing-their-pensions-early-failing-to-plan-for-later-life.html "Are the over-55s accessing their pensions early failing to plan for later life?") to combat soaring prices.

Tensions and uncertainties on the [political front entail downside risks on the growth and financial](https://www.financedigest.com/the-political-wildcard-what-is-trumps-us-presidential-nomination-doing-to-financial-markets.html "The political wildcard: What is Trump’s US presidential nomination doing to financial markets?") front,” said Domenico Ghilotti, an analyst at Equiti.

Stocks with greater [international diversification and a solid financial](https://www.financedigest.com/the-hidden-financial-woes-of-international-students-heading-for-the-uk.html "The Hidden Financial Woes of International Students Heading for the UK") structure, with inflation protection are to be preferred, while financial and cyclical stocks are the most exposed to the downside.

The STOXX 600 index was up 0.8%. It slid 2.6% in the last two sessions on worries the U.S. Federal Reserve may [hike interest rates](https://www.financedigest.com/uk-stocks-slip-as-rate-hike-worries-grip-investors.html "UK stocks slip as rate hike worries grip investors") by a bigger-than-expected 100 basis points later this month.

But worries eased a bit after two of the [Fed’s most hawkish](https://www.financedigest.com/stocks-sag-as-hawkish-fed-cools-china-rally-awaits-us-jobs-data.html "Stocks sag as hawkish Fed cools China rally; awaits US jobs data") policymakers said overnight they favoured another 75-basis-point (bps) hike.

Aggressive steps by major central [banks to battle surging inflation have left investors worried about a possible global](https://www.financedigest.com/global-shares-jump-but-bank-whack-a-mole-not-over.html "Global shares jump but bank ‘whack-a-mole’ not over") recession. Grim economic growth out of [China on Friday due to a hit](https://www.financedigest.com/asia-shares-weigh-china-risks-yen-hits-6-month-high.html "Asia shares weigh China risks, yen hits 6-month high") from COVID-19 lockdowns also added to worries.

The STOXX 600 is set to log its [worst week in a month](https://www.financedigest.com/uk-factories-suffer-worst-month-since-may-2020-as-economy-stumbles-pmi.html "UK factories suffer worst month since May 2020 as economy stumbles – PMI"), down about 1.7%, against the backdrop of fears of an energy supply crunch due to the Russia-Ukraine war.

Investors next week will look to the European [Central Bank’s policy meeting](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus"). Analysts have started to price in a small chance of a 50-bps [hike as opposed to the 25 bps the ECB](https://www.financedigest.com/stocks-euro-gain-amid-divergent-fed-ecb-rate-hike-outlooks.html "Stocks, euro gain amid divergent Fed, ECB rate hike outlooks") has signalled.

[Gains on the day](https://www.financedigest.com/sterling-snaps-four-day-drop-but-gilt-market-havoc-tempers-gains.html "Sterling snaps four-day drop, but gilt-market havoc tempers gains") were led by automakers, up 3.3%. [Retail and tech stocks](https://www.financedigest.com/analysis-u-s-retail-traders-pile-back-into-options-as-meme-stock-mania-flares.html "Analysis-U.S. retail traders pile back into options as meme-stock mania flares") followed.

Miners were hit by the China data and a [profit warning](https://www.financedigest.com/bootmaker-dr-martens-warns-on-profit-as-finance-chief-walks.html "Bootmaker Dr Martens warns on profit as finance chief walks") from Rio Tinto, which cited COVID 19-related labour shortages and rising inflation. Rio shares fell 2.6%. \[MET/L\]\[IRONORE/\]

Luxury [stocks lost as Richemont reported](https://www.financedigest.com/influx-of-one-time-investors-swapping-stocks-for-bricks-and-mortar-reports-agency.html "Influx of ‘one-time’ investors swapping stocks for bricks and mortar reports agency") falling sales in China, while Burberry flagged fading U.S. [demand for sneakers and slides](https://www.financedigest.com/oil-prices-slide-as-hopes-for-china-demand-rebound-fade.html "Oil prices slide as hopes for China demand rebound fade").

Richemont and Burberry lost 4.9% and 6.4%, respectively, while peers including LVMH, Hermes and Kering lost between 0.7% and 1.7%.

Second-quarter [earnings for STOXX 600 companies are expected](https://www.financedigest.com/universal-music-q3-earnings-beat-expectations-streaming-growth-slows.html "Universal Music Q3 earnings beat expectations, streaming growth slows") to increase 21.7% from a year ago, according to Refinitiv data, with a chunk of the boost coming from the energy sector.

(Reporting by Susan Mathew in Bengaluru; Editing by Rashmi Aich and Arun Koyyur)


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