Wed, May 22, 2024

Stock Exchanges: Europe Down on Fed Remarks

Wibest Broker — Stock exchanges: 20 and 50 euro bills

European stocks fell again for the fourth time in a row on Wednesday.

Expectations of an interest rate cut by the US Federal Reserve collapsed after the remarks from its officials.

Fed Chairman Jerome Powell said that the US central bank is “insulated from short-term political pressures.”

This pushed back the pressure from US President Donald Trump to lower interest rates. Powell also ruled out the possibility of a “guaranteed” rate cut next month.

The pan-European STOXX 600 index lost 0.3%. Stocks in the banking sector outperformed. Such stocks usually benefit from higher interest rates, unlike consumers, retailers, or manufacturers.

Last May, the European stock exchanges saw the biggest selloff in two years. Concerns over trade tensions, the weakening global economy, and Brexit contributed to the event. Traders are up until now looking at a blurry outlook.

They are also focusing on the upcoming G20 summit, which takes place this weekend and starts on Friday.

The event could serve as a venue for Trump and his Chinese counterpart President Xi Jinping to talk over the US-China trade situation.  The US-China trade war has loomed large over the financial markets for the past year.

“If you look at expectations for the full year we’re still at around three rate cuts, so the longer picture is unchanged, it’s the dialing back of some of the expectations which is partly behind the reason for the rotations we’re seeing,” said an analyst.

Micron Earnings Top Expectations

Wibest Broker — Stock exchanges: Federal Reserve Office in spring time.

Meanwhile, one good thing about the stock exchanges right now is Micron Technologies. The company’s earnings reports came in and topped expectations.

Micron’s report supported semiconductor companies globally. European companies Infineon, AMS AG, and Siltronic gained between 0.7% and 3.5%.

Energy stocks fetched 0.5%, clocking in the biggest gains among major European sectors. Oil prices climbed 1% amid the heating up of tensions between US and Iran.

Thyssenkrupp, a German industrial conglomerate, gained 3%, making it one of the biggest gainers on the main index. The rise was probably because of a possible offer from Kone for the company’s elevator business.

Behind it was Adidas, which gained 2.4% after an institutional investment firm raised rating on the company’s stock to “buy”.

Other Assets

Apart from stock exchanges, gold prices retreated from nearly-six-year highs as US-Iran tensions continue to escalate, losing more than 1%.

Meanwhile, the New Zealand dollar was also stronger after the Reserve Bank of New Zealand held to its monetary policy.

The RBNZ decided to keep rates at a record low of 1.50%. However, the central bank also expressed some concerns over risks to the economy both at home and abroad. This limited the currency’s gains.

For analysts, the announcement offered a bigger signal that another cut is coming. This expectation would stand unless global growth outlook improves.

The kiwi traded 0.2 % higher against the dollar at $0.6651.

US crude oil futures gained around 2%, hitting a four-week high of $59.10 per barrel after data showed US crude stocks declined.

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