European Stocks Lower; Central Bank Tightening Worries Weigh

022, Apr 2022

( European stock markets traded sharply lower Friday, with investors fretting about the likelihood of slowing economic growth on the back of aggressive monetary policy tightening as well as the impact of the war in Ukraine.

By 3:55 AM ET (0755 GMT), the DAX in Germany traded 1.2% lower, the CAC 40 in France fell 1% and the U.K.’s FTSE 100 dropped 0.4%.

European markets have followed the negative lead from Wall Street and then Asia on the back of comments from Jerome Powell late Thursday, with the U.S. Federal Reserve Chairman saying a half-point interest rate increase will be "on the table" when the central bank meets in May.

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This follows European Central Bank Vice President Luis de Guindos acknowledging the possibility of a rate increase in July, potentially the bank’s first in 12 years. 

Money markets are now pricing in 80 basis points of ECB rate hikes by the end of the year.

The world’s major central banks are looking to tighten monetary policy to combat soaring inflation, just as the war in Ukraine weighs on the outlook for global growth.

The World Bank estimated that the physical damage to Ukraine's buildings and infrastructure from Russia's invasion has reached roughly $60 billion to-date, while Ukraine’s prime minister, Denys Shmyhal, put the total cost of rebuilding the country at $600 billion.

U.K. retail sales fell 1.4% on the month in March, dropping for the third time in the last four months, with soaring fuel costs appearing to have an increasing impact on spending patterns.

In corporate news, Kering (EPA:PRTP) stock fell over 5% after reporting slowing growth at the French luxury group’s star label Gucci, weighed by Covid lockdowns in mainland China.

Anheuser Busch Inbev (EBR:ABI) stock fell 1.9% after the world's largest brewer said it will take a hit of over $1 billion on due to exiting its joint venture in Russia.

SAP (ETR:SAPG) stock fell 4.2% after the German business software group reported a 300 million euros ($325.26 million) hit due to its exit from Russia, while Renault (EPA:RENA) stock dropped 0.8% after the French auto giant, the Western carmaker most exposed to the Russian market, posted a 2.7% drop in first quarter revenues compared with a year earlier.

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Oil prices weakened Friday, on course for weekly losses of around 4%, weighed by prospects of interest rate hikes and slowing global growth, while China, the world’s largest crude importer, continued to struggle with a Covid-19 outbreak.

By 3:55 AM ET, U.S. crude futures traded 0.3% lower at $103.47 a barrel, while the Brent contract fell 0.4% to $107.91. 

Additionally, gold futures rose 0.2% to $1,952.60/oz, while EUR/USD traded 0.3% lower at 1.0806.