June 24, 2022

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European Shares Set To Drift Lower On US Rate Worries

2 min read

European stocks may drift lower at open on Wednesday amid signs the Federal Reserve might take more aggressive action to bring down unacceptably high inflation.

U.S. Treasury yields hit multi-year highs and the U.S. dollar held firm near a two-year high after U.S. Federal Reserve Governor Lael Brainard has said it is “of paramount importance” to get inflation down.

She indicated the Fed could start reducing its balance sheet at a rapid pace from May itself and that rate hikes could come at a more aggressive pace than the typical 25bps increments.

The Fed minutes are likely to be in the spotlight later today, as traders look for further clues about how aggressively the central bank plans to tighten policy.

Oil pared early losses after the European Union decided against sanctions on Russian oil. While the U.K. and Washington have moved to bar Russian crude, almost all of the EU has refrained from an outright ban on Russian oil and natural gas.

Asian markets slipped amid distressing news of strict lockdowns and record spike in Covid-19 cases emerging out of Shanghai.

Adding to growth worries, a private survey showed activity in China’s services sector shrank at the steepest pace in two years in March.

U.S. stocks ended lower overnight as Fed Governor Lael Brainard, who is awaiting Senate confirmation to serve as the Fed’s vice chairwoman, indicated an aggressive approach to shrinking the Fed’s balance sheet.

The Dow dropped 0.8 percent, the S&P 500 shed 1.3 percent and the tech-heavy Nasdaq Composite index lost 2.3 percent.

European stocks ended mixed on Tuesday amid French election worries and macroeconomic uncertainties brought by the Russia-Ukraine war.

The pan European Stoxx 600 edged up 0.2 percent. The German DAX declined 0.7 percent and France’s CAC 40 index tumbled 1.3 percent while the U.K.’s FTSE 100 rose 0.7 percent.

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Market Analysis

2022-04-06 01:29:20

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