On Friday, there was a 1.6% drop in European stocks, as investor sentiment took a beating due to two major global financial institutions issuing recession warnings and bets of a big interest rate hike from the US central bank in the coming week.
The pan-European STOXX 600 index suffered because of the decline in the markets, as it recorded its worst week in the last three months.
Its losses for the day were around 2.9%, as all prominent sectoral indexes were trading in the red, with real estate stocks being the only exception.
The biggest drag was recorded in healthcare, industrials, and financials. On Thursday, FedEx Corp had withdrawn its financial forecast, which saw logistics and delivery companies in Europe tumble.
This was over worries about a global slowdown in demand. There was a decline between 4% and 8% in shares of Royal Mail Plc, DSV Panalpina, Kuehne & Nagel, and Deutsche Post.
Late on Thursday, the World Bank also stated that the global economy was moving towards a recession, with central banks being aggressive in their battle against inflation.
Likewise, the International Monetary Fund (IMF) also asserted that it expected the third quarter to show a slowdown in the economy.
Market analysts said that the World Bank had highlighted inflation risks because the monetary policy tightening appears to be synchronized in a number of countries.
They said that if the impact of these interest rates is compounded, it could result in a steeper slowdown in growth globally.
All focus has now shifted towards the meeting of the US Federal Reserve, which is scheduled to meet on September 20th and 21st.
It is expected to deliver its third interest rate hike of 75 basis points after it has already increased interest rates this year by 225 basis points.
There was also a 1.7% dip in Uniper SE, as the German gas importer has been struggling of late. This was after Russia halted supplies of natural gas via a major pipeline earlier this month.
This has made it difficult for the company to keep up with its rising costs and Russia has not given any deadline as to when they may resume supplies.
So far, there has already been a 1.7% decline in the STOXX 600 index, which puts it on course for its second consecutive monthly decline.
This is because investors are worried about the energy crisis and soaring prices in the euro zone. However, the UK markets are also not doing so good.
There was a 0.6% drop in the benchmark FTSE 100 index in the UK after data showed a higher than expected fall in retail sales in the month of August.
This was yet another indication that the British economy is moving towards a recession. However, as the British pound weakened, the decline in the exporter-heavy index was the least throughout Europe.
The energy crisis has also seen the euro suffer this year, as it has gone below parity against the US dollar.