European stock markets were mostly lower on Friday as traders continue to digest the surprise interest rate decision from the Bank of England (BoE) and new restrictions due to the Omicron variant.
Tech stocks, car manufacturers and oil firms dragged lower as investors raised concerns on how the economy will fare next year.
It also came as UK retail sales in November outstripped expectations, growing 1.4% last month ahead of the 0.8% growth forecast. This was driven by a shift to early Christmas shopping, as well as Black Friday deals.
Online shopping dropped to its lowest level as a proportion of total sales since the start of the pandemic during the month, as shoppers flocked back to the high street.
Consumer confidence also dropped in December due to the spread of Omicron. GfK’s closely-watched index fell 1 point to -15 this month, with people in the UK growing less inclined to make major purchases.
“News about the Omicron variant could not have arrived at a worse time for festive celebrations. As thoughts began turning to Christmas and the New Year, Omicron jumped out of nowhere and threatened to bring Santa’s sleigh crashing to a halt,” Joe Staton at GfK said.
“We end 2021 on a slightly depressed note and it looks like it will be a bleak midwinter for UK consumer confidence, possibly with new COVID curbs and little likelihood of any real uplift in the first months of 2022.”
US markets started the day on the front foot on Thursday, however, as the session progressed a sell-off in the Nasdaq started to weigh on the wider market.
The prospect of slightly higher rates chipped away at the attractiveness of some of the more richly valued sectors, dragging the S&P 500 and Dow along with it.
The Fed this week signalled three quarter-percentage-point interest rate hikes by the end of 2022 to combat surging inflation, buoying economically sensitive parts of the market but putting pressure on heavyweight tech stocks.
Watch: Tech takes a beating as central banks pull back
Richard Hunter, head of markets at Interactive Investor, said: “Following a few days of generally hawkish actions from central banks, investors have been rotating into more economically sensitive sectors at the expense of growth.
As such, the Nasdaq in the US bore the brunt of the selling pressure while the likes of the financials and utilities saw some support.
Asian equities mostly fell on Friday, pulling back from the previous day's rally. In Japan, the Nikkei (^N225) dipped 1.8% while the Hang Seng (^HSI) closed 1.2% lower and the Shanghai Composite (000001.SS) fell 1.1%.
Oil prices also dropped for the first time in three days as the rapid spread of the omicron variant clouds the outlook for energy demand.