LONDON – European markets withdrew on Wednesday, as global investors expect a decisive decision on monetary policy from the US Federal Reserve.
The pan-European Stoxx 600 fell 0.6% late in the morning. Retail stocks fell 2.1% to lead to a loss, while oil and gas stocks rose 0.9%.
The Fed will announce its decision on the high interest rate on Wednesday afternoon, with markets largely expecting the central bank to raise interest rates by half a percentage point as it seeks to curb inflation, along with announcing a plan to cut its balance sheet in June.
“I think it’s more about investors trying to figure out when the tightening of monetary policy is actually starting to affect the real economy and real demand.”
Sunil Krishnan
Head of Multiple Asset Funds, Aviva Investors
Sunil Krishnan, head of multi-asset funds at Aviva Investors, told CNBC on Wednesday that the Fed was the main driver of stock market fluctuations so far this year and is likely to remain so.
“I think maybe it’s less academic thinking about how to change the discount rate when evaluating a company,” he said.
“I think it’s more about investors trying to figure out when the tightening of monetary policy is actually starting to affect the real economy and real demand.”
Corporate profits remain a key driver of stock price movements in Europe. Volkswagen, UniCredit, Enel, Siemens Healthineers, Fresenius and TeamViewer were among those who reported before the bell on Wednesday.
Belgian chemical company Solvay added more than 5% late in the morning after raising its targets. Shares of Kindred Group rose 4.5% after US hedge fund Corvex Management revealed a 10% stake in the online gambling company.
At the bottom of the European blue chip index, Swedish construction company Skanska fell more than 11 percent after its first-quarter earnings report.
In terms of data, business activity in the euro area accelerated in line with expectations in April, new PMI (Purchasing Managers’ Index) showed on Wednesday as services in several major economies reopened after a period of Covid-19 restrictions.
Selection of stocks and investment trends by CNBC Pro:
Eurozone retail sales fell in March as declining consumer confidence and rising inflation squeezed household spending. Sales fell 0.4 percent in March from a month earlier, below the consensus forecast of a 0.1 percent increase among economists surveyed by The Wall Street Journal.
Investors are also watching the war in Ukraine, with the EU’s backing proposing additional oil sanctions against Russia as Russian forces continue to bomb targets in eastern Ukraine.
The European Commission on Wednesday proposed new sanctions against the Kremlin, which will include a six-month phasing out of Russian crude oil imports.
US stock futures were slightly higher at the beginning of pre-market trading as investors prepared for the Fed’s upcoming decision. Shares in the Asia-Pacific region retreated during trading on Wednesday, with Hong Kong’s Hang Seng index falling more than 1 percent as technology giants Tencent and Alibaba fell.
Bond yields in Europe remain high, with the reference yield on 10-year German bonds hovering just over 1% after crossing the mark on Tuesday for the first time since 2015, just two months after being below zero. Profitability is moving back in price.
Subscribe to CNBC PRO for exclusive insights and live workday analysis and programming from around the world.
Add Comment