European stocks lose ground as traders weigh Fed decision, Eurozone growth data

© Reuters

By Scott Kanowsky 

Investing.com -- European shares inched lower in early trading on Tuesday, as investors eyed the release of fourth quarter growth figures from the Eurozone, braced for central bank interest rate decisions this week, and examined a series of fresh corporate earnings.

At 06:30 ET (11:30 GMT), the regional Stoxx 600 fell 0.98%, the DAX index in Germany traded 0.83% lower, the FTSE 100 in the U.K. dropped 0.94%, and the CAC 40 in France decreased by 0.75%.

Preliminary figures from the European Union's statistics agency showed that the Eurozone unexpectedly eked out quarterly growth of 0.1% in the final three months of 2022. Economists had predicted that it would contract by 0.1% instead. On an annual basis, growth in the currency area during the period was 1.9%.

Meanwhile, focus in the markets is zooming in on the Federal Reserve, with policymakers scheduled to begin a two-day meeting that will end with a much anticipated rate decision on Wednesday. The U.S. central bank is widely expected to hike borrowing costs by 25 basis points, which would mark a slowdown in its recent policy tightening cycle.

The Fed's outlook will also be closely watched, as recent U.S. economic data suggested that it may have enough headroom to raise interest rates further.

On Thursday, the European Central Bank and Bank of England will also unveil their latest interest rate announcements. Both are seen raising rates by 50 basis points.

"The closer markets get to this week's central bank events, the more unpredictable day-to-day price movements will get," said analysts at ING in a note. "That said, we stick to our view that the next couple of days are likely to be dominated by profit taking on longs and, in the case of euro markets, by the realisation that pricing rate cuts in 2024 is premature."

Leading into European dealmaking, the MSCI's broadest index of Asia-Pacific shares outside Japan moved lower but remained on pace for its best January performance since 2012. China's blue-chip Shanghai Shenzhen CSI 300 index also declined, retreating from a post-holiday rally on Monday, as investors looked for more clues about the economy's ongoing reopening from COVID-19 restrictions.

All three major indexes on Wall Street slipped as well, weighed down in part by technology shares. A slew of fresh earnings from Silicon Valley giants are due out this week, including results from Facebook-owner Meta Platforms (NASDAQ:META), Google-parent Alphabet (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN).

In Europe, UBS Group AG (SIX:UBSG) reported better than expected net income in the fourth quarter, as elevated interest rates helped offset a drawdown in trading volumes. However, a mixed reaction from analysts weighed on shares in the Swiss bank.

Ubisoft Entertainment (EPA:UBIP) also dropped after analysts at Jefferies cut their rating of the French video game maker to underperform from buy.

But shares in UniCredit SpA (BIT:CRDI) soared towards the top of the Stoxx 600 after the Milan-based bank increased its investor payout target by 40% off the back of record quarterly profit.

Elsewhere, U.S. crude futures were 1.42% lower at $76.79 a barrel at 06:30 ET, while the Brent contract slipped by 1.17% to $83.51 per barrel.

Additionally, gold futures dipped 0.96% to $1,904.40/oz, while EUR/USD was down 0.19% at 1.0823.