Shares dip as rate jitters resurface; Adidas slides on weak outlook

European shares retreated on Friday and were poised for their first weekly decline in three, as traders gauged the prospects of a prolonged global monetary policy tightening, while German footwear maker Adidas' dour forecast also spooked investors.

The pan-European STOXX 600 was down 0.6% at 0932 GMT, after touching a near one-year high on Thursday as a slew of upbeat corporate earnings gave a fillip to risk-on sentiment. European shares have gained nearly 9% so far this year, following a 13% slump in 2022, thanks to recent signs of economic resilience, backed by robust earnings, and hopes of easing policy tightening.

Sentiment took a hit after Richmond Federal Reserve President Thomas Barkin added to a chorus of recent hawkish central bank remarks, while European Central Bank policymaker Joachim Nagel stressed the need for more rate hikes and prevention of inflation expectations sharply topping its 2% target. "The tension we're witnessing now is that it remains to be seen whether the market will be right about interest rates starting to fall later this year or that they will be higher for longer," said Edward Stanford, head of European equity strategy, HSBC.

Retail and travel & leisure stocks, down 2% and 1% respectively, were the worst performers among sector indexes. Energy bucked the trend and advanced 1.4%, boosted by BP and Shell, tracking higher oil prices on Russia's plans to reduce oil output.

Adidas dropped 10.4%, set for its steepest drop in nearly three years on expectations of a high single-digit decline in 2023 sales, also pulling down peer PUMA SE by 3.5%. Swedish defence equipment maker Saab jumped 8.8% to top the STOXX 600 index on 2023 sales forecast and fourth-quarter earnings beats, followed by a 2.7% rise in Italy's biggest electric utility firm Enel on 2022 core profits beat and lower debt.

More than half of the 93 STOXX 600 companies that have reported earnings so far have beaten market expectations, Refinitiv data showed. British lender Standard Chartered slid 4.6%, set for its steepest one-day fall in three months, after First Abu Dhabi Bank, the United Arab Emirates' biggest lender, said it was not currently evaluating a buyout offer.

Italy's EuroGroup Laminations, a maker of components for electric motors, jumped over 6% on debuting on the Milan bourse in Europe's second major IPO so far this year.