June 27, 2022

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European Shares Set For Soft Start On Interest Rate Worries

2 min read

European stocks are likely to open on a sluggish note Thursday on worries that higher interest rates may lead to slower growth.

After having waited too long to begin raising rates, most economists now expect the Fed to raise rates by a half-point at both its May and June meetings.

A slew of Fed officials including St. Louis Fed President James Bullard, Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans are due to make speeches later in the day.

Asian markets were broadly lower despite China again signaling its intention to loosen monetary policy at “appropriate time” amid a Covid outbreak and property-market woes.

Treasuries rose and the dollar flirted with a three-week high while oil rebounded after a steep fall overnight. As EU leaders discuss Russia sanctions, Ukraine wants sanctions that are economically destructive enough for Russia to end its war.

U.S. stocks fell overnight after minutes from the Fed’s March meeting revealed discussions on reducing the size of the central bank’s balance sheet over time in a predictable manner.

Participants generally agreed reducing the balance sheet from May, along with a 50 bps rate hike. The monthly roll-off would consist of $95 billion worth of Treasuries and mortgage bonds.

The tech-heavy Nasdaq Composite fell 2.2 percent, the S&P 500 declined 1 percent and the Dow eased 0.4 percent.

European stocks fell the most in three weeks on Wednesday as tech and other growth shares were hit by a surge in bond yields following hawkish comments from Fed Governor Lael Brainard and Philadelphia Fed President Patrick Harker.

Weak economic data from Germany and uncertainty ahead of Sunday’s first round presidential vote in France also weighed on markets.

The pan European Stoxx 600 gave up 1.5 percent. The German DAX lost 1.9 percent and France’s CAC 40 index plummeted 2.2 percent while the U.K.’s FTSE 100 shed 0.3 percent.

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Market Analysis

2022-04-07 01:32:45

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