European shares post worst weekly loss since September as recession fears mount

"There is a very clear emerging consensus that the risk of recession is a concrete risk for next year," said Giuseppe Sette, president at Toggle.

European shares slid, ending the week sharply lower after major central banks flagged further rate hikes, while economic activity data from the eurozone failed to assuage concerns of a looming recession.

The Europe-wide Stoxx-600 index closed 1.2% lower, ending the week with a loss of nearly 3.3%. The index posted its steepest one-day drop since May in the previous session after the European Central Bank joined the US Federal Reserve in saying monetary policy will continue to tighten even at a risk to the economy.

ECB president Christine Lagarde said on Thursday there would likely be more 50-basis-point rate hikes for a period of time and that the central bank was not "pivoting" yet.

The hawkish messages dealt a blow to markets, which had rallied in recent weeks on hopes that signs of cooling inflation would pave the way for major central banks to end their aggressive rate-hike trajectory soon.

"Beyond the inflationary pressures, there is a growth issue at stake," said Giuseppe Sette, president at Toggle.

"There is a very clear emerging consensus that the risk of recession is a concrete risk for next year. If we have a severe recession next year, earnings are going to fall and valuations are going to be unsustainable," he said.

Italian ministers lashed out at the ECB as its decision to hike borrowing costs raised the financial pressure on one of the eurozone's most indebted countries.

Adding to slowdown concerns, data on Friday showed eurozone business activity in December shrank at the slowest pace in four months, but remained in contraction for the sixth straight month.

Irish bank shares rose sharply but international firms like CRH and Kingspan fell by 1% and 2%, respectively. The Ftse-100 index fell 1.3% after British retail sales fell unexpectedly in November as high borrowing costs eat into household finances.

Eurozone government borrowing costs rose on Friday as investors raised their forecasts on bond yields after the ECB's commentary.

Healthcare stocks weighed on the Stoxx-600, with pharmaceutical companies such as Bayer and AstraZeneca falling 3.8% and 1.8%, respectively.

Industrials .SXNP slid 4.8%, extending losses for their third straight day, followed by rate-sensitive technology stocks, and the telecom sector fell 2.5%.

Reuters and Irish Examiner