European shares slip on fears over rising China COVID cases, await rate decisions By Reuters
Economy 18 minutes ago (Dec 12, 2022 17:30)
© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 9, 2022. REUTERS/Staff/File Photo
By Amruta Khandekar and Bansari Mayur Kamdar
(Reuters) – European shares slipped on Monday as investors braced for U.S. and European central bank interest rate decisions, while rising COVID-19 infections in China also weighed on sentiment.
The STOXX 600 index closed down 0.5%.
Last week, the index posted its first weekly drop in eight as fears of an impending global recession due to aggressive rate hikes from major central banks countered optimism around the loosening of strict COVID-19 curbs in China.
The coming days will be a major test for markets that have been pinning their hopes on central banks scaling back the pace and size of rate hikes, although the strength in U.S. economic data last week cooled some of those expectations.
With recent signs of easing inflationary pressures in the euro zone, the European Central Bank is expected to deliver a dialled-down 50 basis points (bps) rate hike on Dec. 15, a day after the U.S. Federal Reserve’s interest rate announcement.
“The markets are still relying on this narrative that inflation will cool, the central banks will be able to slow down, pause interest rate increases,” said Russ Mould, investment director at AJ Bell.
“But the numbers remain mixed, so it’s perhaps not quite as clear cut as the markets would like it to be.”
The pan-European STOXX 600 has fallen nearly 10.4% so far this year as the ECB embarked on tightening monetary policy, alongside global peers in an effort to tame inflation.
“Underlying inflation is unlikely to clearly peak until later in the year (2023),” Deutsche Bank (ETR:DBKGn) economists said.
“The risks to inflation are to the upside and the market and consensus views on inflation remain too benign,” they added.
With surging COVID-19 cases spurring concerns about a disruption to Chinese economic activity, industrials and some China-exposed luxury firms such as LVMH (EPA:LVMH) weighed on the STOXX 600.
Miners dropped 1.7% as copper prices slipped on economic worries in top consumer China and the U.S. interest rate hike uncertainty. [MET/L]
China-exposed insurance company Prudential (LON:PRU) slid 2.7%, leading Europe’s financial sector lower.
Meanwhile, Danish food ingredients and enzymes makers Novozymes and Chr. Hansen said they have agreed to merge. Chr. Hansen shares rose 17.6%, while Novozymes dropped 15.2% after the joint announcement.
London Stock Exchange Group (LON:LSEG) shares rose 3.0% after Microsoft (NASDAQ:MSFT) agreed to buy a stake of about 4% as part of a broader deal to migrate the bourse’s data to the cloud.
Sanofi (EPA:SASY) slipped after the French drugmaker on Sunday said it pulled out of talks to buy Horizon Therapeutics.
European shares slip on fears over rising China COVID cases, await rate decisions
Terms And Conditions
© 2007-2022 Fusion Media Limited. All Rights Reserved.
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.