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Forex Analysis & Reviews: European stocks fall amid investor worries
time 08.12.2022 11:49 PM
time Relevance up to, 09.12.2022 10:56 PM

European markets closed lower on Thursday. Traders are anxiously awaiting the European Central Bank's decision on the key interest rate.

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The pan-European Stoxx 600 fell by 0.16% to 435.51 points.

The French CAC 40 lost 0.2%, the German DAX increased by 0.02% and the British FTSE 100 declined by 0.23%. At the same time, Britain's FTSE 100 falls for a third straight session, while the French one for the fifth.

Leaders of growth and decline

The share price of British American Tobacco, a multinational cigarette and tobacco manufacturer, fell by 2.5%. The day before the company said it expects net finance costs to increase.

DS Smith, the British multinational packaging business, soared 2.1%. Earlier, the company raised its interim dividend and forecast a stronger-than-expected annual performance on the back of rising packaging prices and strong demand from suppliers of consumer goods.

Swiss locomotive and railcar maker Stadler Rail AG fell 4.5%.

The share price of Aroundtown S.A., a Luxembourg-based real estate company, fell 7.2%.

Irish low-cost carrier Ryanair Holdings PLC rose 1.4%, it said late Wednesday that Michael O'Leary will remain as chief executive officer until at least July 2028.

Market sentiment

Experts said that investors are wary as they await a slew of interest rate decisions from major central banks.

Australia's central bank raised its key interest rate to a 10-year high on Tuesday. In addition, representatives of the central bank confirmed forecasts of the need for further rate hikes in order to curb record levels of inflation.

Next week, the European Central Bank and the Bank of England will hold meetings on monetary policy. Markets forecast that the British and European central banks will raise the interest rate on the backdrop of the permanent growth in inflation. Thus, earlier in his interview to the Italian newspaper Milano Finanza, ECB Chief Economist Philip Lane said consumer-price growth is probably near its zenith.

The ECB raised all three key ECB interest rates by 75 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00%, 2.25% and 1.50% respectively. Most analysts expect the ECB to increase the lending rate to at least 2% from 1.5% at its December meeting.

In addition, the U.S. Federal Reserve's monetary policy decision is scheduled to be announced on December 14.

Recall that last Wednesday Fed Chairman Jerome Powell spoke at the Brooking Institute Hutchins Center on fiscal and monetary policy.

In his statement, the head of the central bank signaled a potential easing of monetary policy and a slowdown in future interest rate hikes on the back of more favorable data on inflation in America.

The minutes of the Fed's November meeting were released last Friday. According to the document, the majority of the Fed leaders considered it reasonable and appropriate to slow down the central bank's interest rate hike in the near future.

According to the world's leading derivatives marketplace CME Group, to date, 71.1% of analysts expect to raise the interest rate at the December meeting by 50 points - to 4.25-4.5% per annum.

Recall that the central bank raised interest rates by 75 basis points in October for the fourth consecutive meeting. The rate is currently at its highest level since January 2008, at 3.75-4.00% per annum.

At the end of next week, Eurostat will publish its final estimate of annual inflation in the euro area at the end of last month. According to experts' preliminary forecasts, consumer price growth fell to 10% in November from October's 10.6%.

Trading results the day before

On Wednesday, the leading stock exchange indicators of Western Europe closed in the red zone after the U.S. and Asian stock indices.

Thus, the Stoxx Europe 600 was down by 0.62% to 436.20 points.

French CAC 40 lost 0.41%, German DAX dropped 0.57% and British FTSE 100 declined 0.43%.

The share price of the Swedish software developer Samhallsbyggnadsbolaget i Norden AB plummeted by 8.3%.

British pharmaceutical company GSK PLC soared by 7.5%.

The share price of Moonpig Group PLC, a British online greeting card and gifting company, plunged 8.9%. The company said that in the six months to October 31, interim profit was cut in half as expenses ballooned.

On Wednesday, European investors paid attention to the negative trends in the U.S. and Asian stock exchanges. At the end of trading the day before U.S. stock indices fell by 1-2%. Thus, the S&P 500 index shed 1.44%, the NASDAQ Composite dropped 2% and the Dow Jones Industrial Average lost 1.03%.

Meanwhile, major Asia-Pacific indicators also closed Wednesday in the red zone.

Chinese traders had a negative view on the latest data for the country, which turned out to be lower than analysts' preliminary forecasts. Thus, last month in annual terms the volume of exports in the country decreased by 8.7% and imports - by 10.6% due to coronavirus disruptions at home.

On Wednesday, investors also analyzed new data on Germany. According to Destatis, Germany's Federal Statistical Office, industrial output fell 0.1% in October compared with September. Experts forecasted an average decline of 0.6%.

Irina Maksimova,
Analytical expert of InstaForex
© 2007-2023
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