Stock market declines in Europe amid the increasingly aggressive Fed

European stocks fell in early trading on Wednesday, marking a decline from their six-week highs after investors turned their attention to concerns about the aggressive rise in US interest rates, which could potentially hurt growth, and expected new Western sanctions against Russia, which will give additional impetus to inflation, Reuters reported.

The general European index STOXX 600 reported a decline of 5.09 points, or 1.1%, to 457.98 points. The benchmark is on track to end its three-day series in the green sector, following losses on Wall Street and in Asia. The European regional technology index SX8P fell 2.55%.

The German DAX fell 199.24 points, or 1.38%, to 14,225.12 points. The leading index of the London Stock Exchange FTSE 100 registered a decline of 36.13 points, or 0.47%, to 7,577.59 points. The French measure CAC 40 fell 82.48 points, or 1.24%, to 6,563.03 points.

European stocks followed the sell-off in the United States in the previous session, after the member of the Board of the US Federal Reserve Leil Brainard spoke about a more aggressive rise in interest rates and shrinking the balance sheet of the central bank.

“While investors expected the Fed to take action to curb inflation, the likely pace at which the central bank is expected to act is what worries the market. If you tighten monetary policy too quickly, the economy could fall into recession, “said Russ Mole, investment director at AJ Bell.

“Concerns about the strength of the US economy have naturally led investors to worry about the state of other geographical areas,” he added.

Calls for a tighter tightening of policy by the Fed before the publication of the minutes of the last meeting of the financial institution come at a time when members of the European Central Bank have expressed the need to limit incentives to prevent rising inflation expectations beyond the target. the central bank of 2%. The next ECB meeting is next week.

Concerns about inflation, meanwhile, have resurfaced, as proposed new EU sanctions against Russia could include a ban on imports of Russian coal and a ban on Russian ships entering ports in the bloc’s countries. A ban on oil imports from Russia is also being considered.

French stock markets are in a state of uncertainty ahead of the country’s first round of presidential elections this weekend. Emmanuel Macron is expected to defeat Marine Le Pen, although the far-right has narrowed the gap with the current president in recent weeks. The chance for the elections to be decided in the first round is almost zero, as the runoff is scheduled for April 24.

“A period of high volatility should not be ruled out between the two rounds if the difference between the candidates is small,” said Vincent Mortier, Amundi’s chief investment officer.

“However, we remain convinced that pragmatism will prevail in the end and that these elections will not be destructive for the markets,” he added.

Losses on Wall Street

Leading US stock indexes fell on Tuesday after US Federal Reserve Board member Leil Brainard signaled that the central bank could be more aggressive in its tightening policy, CNBC reported.

The Dow Jones Industrial Average fell 280.7 points, or 0.8 percent, to 34,641.18 points. The broad Standard & Poor’s 500 fell 57.52 points, or 1.26%, to 4,525.12 points. The index of high-tech companies Nasdaq lost 328.39 points of its value, or 2.26%, ending the session at 14,204.17 points.

“Ultimately, this (tightening Fed policy) will slow economic growth. The stock should reflect that, “Mark Zandi, chief economist at Moody’s Analytics, told CNBC. “For this reason, I expect the stock market to have some difficult months, as it is eventually adjusting to what the Fed is doing and will do in the future.”

The biggest losers of the day were the shares of technology companies. Shares of chipmakers Nvidia and AMD fell 5.22% and 3.36%, respectively. Some analysts believe that technology companies may be hardest hit by the Fed’s campaign to raise interest rates, as this will make investors take less risk and buy stocks with stable profits instead of growth stocks that promise big profits. in the future.

Meanwhile, the utilities and health sectors made gains on Tuesday. Shares of pharmaceutical giants Johnson & Johnson and Pfizer rose 0.65% and those of Procter & Gamble and Walmart rose 0.35% and 0.28%, respectively. The shares of the cruise ship operators Carnival and Norwegian Cruise Line increased by 2.43% and 1% respectively

“The way the market reacts today is a typical example of a defensive position on the part of investors. The commodity-related sectors are performing better, while technology stocks are performing worse due to fears of high-interest rates, ”said Keist Lerner of Truist. “There are concerns about the economy and the Fed’s ability to achieve a soft landing,” he added.

After the session began with a decline, shares turned red after Leil Brainard said that the Federal Reserve must “quickly” shrink its balance sheet to reduce inflation.

“Inflation is too high and there are risks of acceleration,” she said, adding that the Fed needed a steady rate of interest rate hikes.

Following her comments, the yield on 10-year US government securities jumped to 2.56%, reaching its highest level since May 2019.

Fears of the recession continued to scare investors on Tuesday, and Deutsche Bank became the first major Wall Street bank to predict a setback in the United States, citing the Fed’s more aggressive fight against inflation as a sign.

“The US economy is expected to suffer a severe blow from the Fed’s further tightening by the end of next year and early 2024,” the bank’s economists said in a note to customers on Tuesday.

Decreases in Asia

Technology stocks led to the decline in stock markets in the Asia-Pacific region on Wednesday, following the losses of Wall Street in the previous session, CNBC reported.

The leading index of the Tokyo Stock Exchange Nikkei 225 registered a decline of 437.68 points, or 1.58%, to 27,350.3 points. The price of the shares of the technology conglomerate SoftBank decreased by 2.81%.

Hong Kong’s Hang Seng fell 421.79 points, or 1.87%, to 22,080.52 points. The decline comes amid a decision by Hong Kong Secretary-General John Lee to resign two days after Hong Kong Chief of Staff Kerry Lam announced he would not run for a second term.

Shares of Alibaba, Meituan, and Tencent listed in Hong Kong fell 5.36%, 3.65%, and 2.31% respectively.

In mainland China, the Shanghai Composite benchmark rose 0.71 points, or 0.02%, to 3,283.43 points, while the smaller Shenzhen Composite Index rose 0.14 points, or 0.01%, to 2 127.96 points. This is the first session for the two indexes this week after they were closed on Monday and Tuesday on the occasion of a national holiday.

South Korean benchmark Kospi fell 24.17 points, or 0.88%, to 2,735.03 points. The price of Kakao shares decreased by 2.33%.

In Australia, the ASX 200 index fell from 37.8 points, or 0.5%, to 7,490.1 points.

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