Europe close: Fed minutes knock stocks lower
By Alexander Bueso
Date: Thursday 06 Jan 2022
(Sharecast News) - European were knocked sharply lower on Thursday after hawkish comments in US Federal Reserve meeting minutes hit US shares overnight.
The pan-European Stoxx 600 was down 1.25% at 488.16 with almost all major regional bourses following suit. Technology stocks paced losses on the pan-European gauge retreating by 2.36%, although Banks traded higher by 1.12%.
Brent crude oil futures and 10-year German Bund yields were higher but Euro/dollar was little changed.
Minutes from the Federal Reserve meeting revealed a tightening job market and persistent inflation that could lead to higher interest rates sooner than expected. The news also hit Asian markets overnight.
"Investors should note that the biggest factor behind yesterday's massive sell off and today's risk off mode is that the Fed is likely to cut down its holdings of Treasuries and mortgage-backed securities, worth about $8.3trln, off its balance sheet," said Avatrade analyst Naeem Aslam.
"The FOMC minutes indicated that it could begin as soon as the beginning of the second quarter of 2022, after the Fed executes its first interest rate hike. This news came as a surprise to investors because the Fed has already sped up its winding down of quantitative easing measures and brought forward its timeline for raising interest rates."
"The discussion of Fed officials regarding reducing treasuries would further withdraw liquidity from markets and add to uncertainty related to the performance of financial markets in coming months."
In equity news, shares in Dr Martens tumbled more than 8% to the bottom of the Stoxx after private equity firm Permira sold 65m shares in the iconic bootmaker in a placing.
Discount retailer B&M European Value Retail slipped despite announcing that full-year profits were set to be above analyst expectations following a "strong" performance over the Christmas period.
Carrefour shares rose to their best level since early 2018 on news grocer Auchan is exploring a fresh attempt at a takeover of its domestic French rival.
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