Market: Shares are seen in the red with central banks

by Laetitia Volga

PARIS (Reuters) – European stock markets ended Thursday’s session sharply lower after more aggressive announcements from major central banks in a bid to bring inflation down for a long time.

In Paris, the CAC 40 lost 3.09% to 6,522.77 points, the biggest daily drop since March. The British Footsie fell 0.93% and the German Dax 3.28%.

The EuroStoxx 50 index fell by 3.51%, the FTSEurofirst 300 by 2.85% and the Stoxx 600 by 2.85%.

On Wall Street, at the time of the close in Europe, the Dow Jones was down 2.3%, the Standard & Poor’s 500 was down 2.5% and the Nasdaq Composite was down 2.95%.

At the end of the year’s last meeting, the Federal Reserve and the European Central Bank insisted on their determination to continue their fight against rising prices.

After the Fed on Wednesday, whose members on average expect an increase in interest rates to more than 5% in 2023, a higher level than expected, it is the ECB’s turn to have dampened investors’ hopes for a real “pivot” in the rate hike cycle.

Although the Frankfurt institution reduced the scale of its interest rate hike to 50 basis points, it stressed that the tightening of its policy should be extended, as its new economic forecasts show that the rise in prices in the eurozone could remain above 2% until 2025.

“The message from the ECB was clearly ‘hawkish’, reflecting a surprisingly large upward revision of full-horizon inflation projections and growth projections, which we believe remain overly optimistic,” said Marco Valli, head of research at UniCredit.

RATE

Eurozone government bond yields rose after the ECB’s announcements, benefiting from the central bank’s firm stance on inflation.

That of the 10-year German ended the day up 17 basis points at 2.083%, its highest closing level in a month, and its French equivalent at 2.591%.

In the US market, the decade is down to 3.4518% with a number of disappointing economic indicators.

CHANGES

The euro took advantage of the ECB announcements to hit a six-month high above $1.07 before falling back to around 1.0636.

The dollar is up 0.73% against a basket of international currencies.

The pound fell 1.76% against the dollar after the expected half-point rate hike by the Bank of England, whose statement revealed a widening rift between its committee members.

“While it is normal to see policymakers at odds near the end of an interest rate cycle, the split makes it harder to predict how far rates will rise,” said Philip Shaw, chief economist at Investec.

VALUES

The technology sector, whose players are particularly sensitive to changes in interest rates, suffered one of the biggest declines of the day. Worldline lost 6.77% and STMicroelectronics 4.88%.

Luxury industry groups LVMH, Hermès and Kering fell 3.55% to 5.57% in response to below-expected Chinese economic indicators.

Swedish clothing giant H&M fell 6.85% as growth in net sales in September-November was deemed insufficient.

OIL

With the strengthening of the dollar and fears about demand, the oil market fell: Brent lost 1.86% to $81.16 a barrel. barrel and US light crude (West Texas Intermediate, WTI) 2.17% to 75, $6.

(Laetitia Volga; Editing by Kate Entringer)

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