European shares slump as rate hike fears intensify, Adidas weighs

STOXX 600 down 1%

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Adidas slumps on profit warning

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Saab tops STOXX 600 on higher operating profit

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Energy stocks buck weak trend as oil prices rise

Feb 10 (Reuters) - European shares dropped on Friday, pressured by a jump in yields as investors grappled with the prospect of a prolonged period of interest rate hikes by top central banks, while a dour outlook by Adidas added to the downbeat sentiment.

The pan-European STOXX 600 closed down 1.0%, logging its first weekly decline in three weeks.

European shares have gained nearly 8% so far this year, following a 13% slump in 2022, thanks to recent signs of economic resilience, backed by robust earnings, and hopes of a moderation in policy tightening.

However, a chorus of Federal Reserve and European Central Bank (ECB) policymakers in recent days have pushed back against market expectations that the rate hiking cycle was close to an end, with ECB board member Isabel Schnabel being the latest to stress on the need for more tightening.

All eyes are on U.S. consumer prices data for January expected next week which will be crucial in shaping market expectations of future interest rate hikes.

"Markets are fearing higher interest rates and (it's) going to be a push and pull until the U.S. CPI data on Tuesday," said Giles Coghlan, chief market analyst at HYCM.

Coghlan also said a U.S. consumer sentiment survey

showing an increase

in one-year inflation expectations in February has exacerbated jitters around interest rate hikes.

German government bond yields

rose on Friday, heading for the largest weekly rise of 2023.

Travel & leisure stocks and retailers, were the worst performers among STOXX 600 sector indexes, down 3.9% and 3.5% respectively.

Energy bucked the trend and advanced 2.3% boosted by BP and Shell, which tracked a rise in oil prices on Russia's plans to reduce oil output.

Adidas dropped 10.9%, logging its steepest drop in nearly three years after the sportswear maker warned it could plunge to a loss this year for the first time in three decades. The company's peer PUMA SE also fell 4.6%.

Swedish defence equipment maker Saab jumped 11.8% to top the STOXX 600 index after reporting a rise in fourth-quarter operating profit.

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 5.0% after First Abu Dhabi Bank said it was not currently evaluating a buyout offer.

Zara owner Inditex fell 4.6% after the world's biggest fast fashion retailer agreed an inflation-busting 20% increase in average wages for shop workers in its home market of Spain. (Reporting by Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich and Andrea Ricci)