Europe close: Shares end lower ahead of Fed meeting
By Alexander Bueso
Date: Wednesday 04 May 2022
(Sharecast News) - European markets fell back on Wednesday as investors opted to take some money off the table ahead of a monetary policy decision by the US Federal Reserve scheduled for later in the day.
"It is not difficult to work out why stocks are edging down this afternoon," said IG chief market analyst Chris Beauchamp.
"The Fed's rate hike move might be broadly priced in, but markets are clearly nervous that an even more hawkish FOMC might prompt a surge in volatility that could push indices back below last week's lows."
The pan-European Stoxx 600 was down 1.08% at 441.37, with all major regional bourses lower alongside. Markets are looking for a US rate hike rates of half a percentage point as the country's central bank looks to stymie surging inflation.
"Whether the Fed hikes by 0.50% or not has been analysed to death. The crux will be the statement and the Fed's forward guidance on the path of interest rates," said OANDA analyst Jeffery Halley.
"Markets, perhaps like the Fed, are clinging to the hope that the terminal Fed Funds rate is mostly priced into the market now. There remain definite upside risks to that point of view, as there are across much of the Anglo-Saxon world."
"Perhaps the only mitigating factor will be the start of quantitative tightening by the Fed. That may have more of an impact than Fed Fund hikes if it starts pushing the US yield curve higher once again."
In the eurozone, business activity rose in April driven by activity in the services industry as Covid restrictions were eased, offsetting a near-stall in manufacturing output growth, a key survey showed on Wednesday.
S&P Global's final composite Purchasing Managers' Index (PMI) rose to 55.8 in April from March's 54.9, matching a flash estimate. A reading above 50 indicates growth.
On the Ukraine war front, the European Union was expected to propose additional oil sanctions on Russia as Moscow's forces continue to bombard targets in eastern Ukraine.
There was also talk of possible restrictions on EU firms insuring Russian oil tankers, regardless of their destination.
Investors were also keeping an eye on attempts by the Vatican to help broker a peace deal.
In equity news, TeamViewer shares were up 9% as the remote desktop software maker as first quarter profits increased.
Kindred Group shares gained after US hedge fund Corvex Management disclosed a 10% stake in the online gambling company.
Bookmaker Flutter Entertainment shares were higher by 5% as the gambling company saw group revenues grow in the three months ended 31 March and the number of average monthly players rose by 15% to 8.85m.
Shares in Belgian chemicals company Solvay added 5.8% after raising its guidance.
Swedish construction company Skanska slid 10% after its first-quarter earnings report disappointed investors.
Direct Line shares fell 6% as the UK insurer reported lower premium revenues as new rules banning excessive price hikes for loyal customers kicked in.
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