European stocks fell at the start of trading on Friday after Federal Reserve Chairman Jerome Powell said raising interest rates by half a percentage point was “on the table” for next month.
The pan-European Stoxx 600 fell 1% shortly after the stock market opened, with the retail, technology and oil and gas sectors suffering the biggest losses.
Friday’s market opening in Europe comes after a dramatic turnaround in US stock markets on Thursday, with key averages closing lower and erasing earlier gains.
Markets … need to take a much steeper, much faster course than they thought a week ago, a month ago or three months ago.
Daniel Maurice
Chief Market Strategist, BNP Paribas Asset Management
Earlier on Thursday, Federal Reserve Chairman Jerome Powell commented on the possibility of a larger-than-usual rate hike next month, scaring markets. Speaking during a panel of the International Monetary Fund, moderated by Sarah Eisen of CNBC, Powell said that curbing inflation is “absolutely essential.”
“I would say that 50 basis points will be on the table for the meeting in May,” he added.
US bond yields also jumped on Powell’s comments as stocks in Asia fell on Friday.
“Markets … need to adopt a much steeper, much faster rate than they thought a week ago, a month or three months ago. So I think there’s still that adjustment,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management told CNBC on Friday.
“I think the key question about the direction of the markets will be: When does this process stop? When we have enough, full pricing, where will the interest rates be in a year. And I think once that happens, and I hope it’s soon, then we’ll see real stabilization in the markets. “
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Stock movements
In retail space, B&M sank by more than 5% due to the news that its CEO will retire next year. In addition, data in the United Kingdom show that retail sales fell more than expected in March.
“The significant drop in retail sales in March looks like the beginning of a period of consumer spending weakness, not just a gap,” Samuel Tombs, the UK’s chief economist at Pantheon Macroeconomics, said in a note Friday.
Shares of French luxury retailer Kering also fell more than 5% amid worries about the results of its sales in China, where zero Covid policy worries investors.
SAP announced its profits on Friday, marking a blow to its revenue from leaving Russia. The German software giant said its decision to leave Russia after its invasion of Ukraine is expected to have a negative impact on revenue of about 300m euros ($ 325m).
Speaking to CNBC on Friday, the company’s chief executive Christian Klein told CNBC that cloud subscription revenue was “very sticky” and said the transformation plan was ahead of schedule.
French elections
French voters go to the polls on Sunday. The second – and final – round of elections pits incumbent President Emmanuel Macron against anti-immigrant leader Marine Le Pen.
In a note Thursday, Goldman Sachs described the election as a turning point in France’s political path.
“If Mr Macron is re-elected, we would expect him to revive his reformist agenda as a continuation of his pro-integration plan for Europe,” said analysts led by Sven Jari Sten.
“These reforms are largely embedded in our current forecasts. If Mr Le Pen is elected, we would expect an institutional stalemate, probably due to the lack of a parliamentary majority in the legislative elections in June next June and significant frictions with the EU partners. “
– Yun Li from CNBC contributed to this report.
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