Europe close: Stocks extend bounce
By Alexander Bueso
Date: Tuesday 21 Mar 2023
(Sharecast News) - European shares extended their rebound from the turmoil of recent days after the rescue of Credit Suisse, with investors now focused on how the US and UK central banks will respond with interest rate decisions this week.
The Stoxx 600 benchmark index added 1.48% to 446.68, while France's CAC 40 put on 1.42% to 7,112.91 and Germany's Dax gained 1.75% to 15,195.34
UBS shares were up over 12% in response to its $3.2bn takeover of its famous Swiss rival and the Stoxx 600 sector gauge for lenders advanced 3.79%.
"With the Federal Reserve rate meeting due to start later today, markets have become increasingly divided as to what the FOMC may well do when it comes to interest rates tomorrow, with opinions split between another 25bps hike, a pause, and a 25bps rate cut," said CMC Markets analyst Michael Hewson.
"Assuming recent gains hold, and we get no further surprises then the odds still favour a 25bps rate rise, otherwise, the Fed runs the risk that it sends the message it is more concerned about financial stability than it is about its fight against inflation. A rate cut would send an even worse message that the Fed sees something the market doesn't and could spook already jittery markets even further."
In economic news, the latest survey from the ZEW Center for European Economic Research in Mannheim showed that German business sentiment deteriorated more than expected in March.
The headline ZEW investor expectations index fell to 13.0 from 28.1 a month earlier. Economists had been expecting a decline to 17.1. Meanwhile, the current conditions index dipped 1.4 points to -46.5.
ZEW President Achim Wambach said: "The international financial markets are under strong pressure. This high level of uncertainty is also reflected in the ZEW indicator of economic sentiment.
"The assessment of the earnings development of banks has deteriorated considerably, although it still remains slightly positive. The estimates for the insurance industry have also declined significantly."
Elsewhere, data from Eurostat showed that eurozone construction output rose 3.9% on the month in January, reversing the 2.3% drop seen in December.
In other equity news, shares in UK and French DIY retailer Kingfisher reversed earlier gains to trade down, as it posted a drop in full-year profit - in line with its guidance - with trade normalising after the pandemic boost.
Thyssenkrupp was up 4% after the German Handelsblatt newspaper reported that CVC was considering buying its steel unit.
Pearson dipped even after agreeing to sell its online learning unit to private equity group Regent.
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