🚀 June’s AI-picked stocks soar, with Adobe +18.1% in 11 days. Don’t miss July’s upcoming picks.Unlock full list

European Stocks Lower; Caution Ahead of Federal Reserve Meeting

Published 09/19/2022, 03:46 AM
Updated 09/19/2022, 03:47 AM
© Reuters.

By Peter Nurse

Investing.com - European stock markets weakened Monday, with investors wary ahead of a series of central bank meetings this week, including the Federal Reserve, which are expected to result in further monetary tightening.

By 03:45 ET (07:45 GMT), the DAX in Germany traded 0.5% lower, the CAC 40 in France fell 1.1%, while U.K.’s FTSE 100 was closed for Queen Elizabeth II’s funeral.

The main focus this week will be on the two-day U.S. Federal Reserve meeting, starting on Tuesday, which is widely expected to result in another 75 basis point interest rate hike.

There remains the possibility of a surprise 100 bps hike by the Fed, given the stubbornness of U.S. inflation, and this is likely to weigh ahead of Wednesday’s official announcement.

The Fed isn’t the only central bank in play this week.

The Bank of England meets on Thursday, with its gathering delayed by a week after the death of Queen Elizabeth II, and is expected to hike rates by another 50 basis points. This comes ahead of a mini-budget by the new Chancellor of the Exchequer Kwasi Kwarteng on Friday.

Thursday will be a busy day, with the Swiss National Bank, the Bank of Japan, and Norway’s central bank also holding policy-setting meetings.

Today’s weakness is occurring despite the news that the People’s Bank of China cut a repo rate and also increased cash injections into the economy, with the central bank seeking to boost growth in the second largest economy in the world, a major regional growth driver, which has been hit hard by COVID-19 lockdowns.

The economic data slate is largely empty Monday, but the first look at European business activity in September comes on Friday with the release of PMI data from the Eurozone and the U.K.

The Eurozone PMI has already spent two months below the 50 level that separates contraction from expansion, and the risk of a euro-area recession has reached its highest level since July 2020.

Economists polled by Bloomberg now put the probability of two straight quarters of contraction at 80% in the next 12 months, up from 60% in a previous survey.

In corporate news, Volkswagen (ETR:VOWG_p) stock rose 1.1% following the news the auto giant is targeting a valuation of up to 75 billion euros ($75.1 billion) for luxury car maker Porsche, in what will be Germany's second-largest initial public offering in history.

Oil prices weakened Monday, overturning earlier gains as fears of a global recession caused concerns that fuel demand growth will slow.

The market has edged higher earlier Monday after China had started easing curbs in Chengdu, a southwestern city of more than 21 million people and the biggest city to face lockdowns after Shanghai earlier this year.

By 03:45 ET, U.S. crude futures traded 1.1% lower at $83.82 a barrel, while the Brent contract fell 0.8% to $90.66.

Additionally, gold futures fell 0.9% to $1,669.15/oz, while EUR/USD traded 0.4% lower at 0.9978.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.