Europe close: Stocks drop as ECB sounds hawkish note
By Alexander Bueso
Date: Thursday 15 Dec 2022
(Sharecast News) - European stock markets finished sharply lower on Thursday as interest rates were lifted in Switzerland, Norway, the UK and in the euro area even as investors were digesting hawkish comments overnight out of the US Federal Reserve.
"The collapse in equity valuations comes as traders face up to an impending economic collapse where central banks see to exacerbate rather than remedy the situation," said IG senior market analyst Josh Mahony.
The pan-regional Stoxx 600 index was down 2.85% at 429.91, alongside a 3.28% drop for Germany's Dax to 13,986.23, although the Spanish Ibex 35 was down by a lesser 1.7% to 8,218.80.
During her post-meeting press conference, ECB chief Christine Lagarde, left open the door to several additional 50bp interest rate hikes, adding that the ECB was not pivoting and had more ground left to cover than the Federal Reserve.
In response, the yield on the 10-year German bond yield jumped by 14 basis points to 2.08%.
Europe's single currency initially spiked higher, reaching an intra-day high of 1.0735 versus the Greenback, but by the close of trading had fallen back to 1.0603, possibly as a result of the increased risk aversion.
Worth noting, economists at MUFG and Pantheon Macroeconomics believed the ECB's new inflation forecasts were too pessimistic.
And while both marked up their estimates for the ECB's peak rate, the former did so by only 50bp to 3.0% while Pantheon upped its estimate by 75bp to 3.5%.
The Swiss National Bank lifted its key policy rate on Thursday by 50 basis points to 1.00%, while Norway's central bank lifted its benchmark rate by 25bp to 2.75%.
Both decisions were as expected.
The Fed on Wednesday raised interest rates by half a percentage point after delivering four consecutive 75 bps hikes, but signalled more increases in borrowing costs by the end of 2023.
"I wish there were a completely painless way to restore price stability," said the central bank's chair Jerome Powell. "There isn't, and this is the best we can do."
US and Asian markets both fell on the news and what some market commentary labelled as hawkish remarks from Powell. To add to the gloom, a China data dump overnight covering the month of November showed worsening conditions due to strict Covid 19-related curbs.
In equity news, shares in fashion chain H&M fell despite a better than expected fourth quarter.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN