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Europe close: Stocks weaker on renewed interest rate fears

By Josh White

Date: Tuesday 06 Dec 2022

Europe close: Stocks weaker on renewed interest rate fears

(Sharecast News) - European shares were below the waterline at the close on Tuesday, after strong services data in the US suggested policymakers might need to remain aggressive with interest rates for longer than hoped.
The pan-regional Stoxx 600 index was down 0.58% at 438.92, as the DAX in Frankfurt was 0.72% weaker at 14,343.19.

In Paris, the CAC 40 slipped 0.14% to 6,687.79, while London's FTSE 100 was 0.61% weaker at 7,521.39.

"It's been another lacklustre and negative session for European markets, with investors keeping their gaze very much fixed on next week's central bank meetings from the Federal Reserve, as well as the European Central Bank," said CMC Markets chief market analyst Michael Hewson.

"Having seen decent gains over the last few weeks there appears to be little appetite to drive markets much higher in the short term, with modest profit taking helping to keep a lid on things."

Sentiment was hit earlier by S&P Global's eurozone construction purchasing managers index, which fell to 43.6 in November, down from 44.9 in October for a seventh consecutive monthly contraction across the sector.

November's decline was the sharpest since May 2020, with France leading the downturn at 40.7, followed by Germany at 41.5 - which had recorded the worst downward trend in September and October.

Elsewhere in economic news, German factory orders rose more than expected in October, according to figures released by Destatis.

Orders were up 0.8% on the month following a revised 2.9% decline in September, coming in comfortably ahead of expectations for a 0.1% increase.

"Worries that the Fed could unwrap an unwelcome present of another super-sized rate hike when policymakers meet next week are sprinkling Christmas fear on indices," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, in an earlier note.

"Wall Street registered its worst day in almost a month after a snapshot from the services industry showed consumer resilience was strong."

That, Streeter said, was fuelling speculation that the US central bank would need to be "more Scrooge-like", and make borrowing even more expensive to rein in inflation.

"Companies still appear to be dealing with pent-up demand with the ISM reading showing the services sector is expanding merrily.

"With central bank policies so far having a meagre impact on the jobs market, the chances of a 0.75% rate hike being announced on the 14th are now considered to be higher.

"The potential effect of another rapid tightening round has led to jitters about repercussions for the global economy."

In equity news, equipment rental firm Ashtead gained 0.64% after it said that full-year results were set to be ahead of its previous expectations.

SSP Group was ahead 2.96% after the travel caterer swung to a profit on the back of a rebound from the Covid pandemic.

Phoenix Group was up 2.55% after the UK life insurer set a target to generate around £1.5bn in long-term cash from new business by 2025, as it looked to build on growing demand for corporate pensions insurance deals.

Orsted added 1.37% after the renewable energy firm said it planned to invest in a large-scale green hydrogen facility in Denmark.

On the downside, Aeroports de Paris slumped 12.6% after Royal Schiphol Group said it was selling its remaining stake in the operator of both the Orly and Charles de Gaulle airports in Ile-de-France.

Reporting by Josh White for Additional reporting by Frank Prenesti.


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