European Stocks Close Notably Lower On Growth Worries, Rate Hike Concerns

European stocks closed notably lower on Tuesday amid rising concerns that aggressive monetary tightening by central banks to fight inflation might result in a global economic recession.

Investors, looking ahead to monetary policy announcements from the Federal Reserve, the Bank of England, the Swiss National Bank, the Bank of Japan, and the People's Bank of China, also reacted to the rate decision by Swedish central bank, and digested a slew of economic data from the continent.

Sweden's central bank raised its benchmark rate at a sharper-than-expected pace on Tuesday citing high inflation.

The Executive Board of Riksbank decided to raise the key interest rate by 1 percentage point to 1.75%. Markets widely expected a 75 basis-point rate hike.

The board said the monetary policy needs to be tightened more to bring inflation back to the target. The forecast indicated that the policy rate will be raised further in the coming six months.

The pan European Stoxx 600 fell 1.09%. The U.K.'s FTSE 100 drifted down 0.61%, Germany's DAX declined 1.03% and France's CAC 40 ended 1.35% down, while Switzerland's SMI dropped 1.48%.

Among other markets in Europe, Austria, Belgium, Czech Republic, Denmark, Finland, Iceland, Ireland, Netherlands, Norway, Poland, Portugal, Russia, Spain and Sweden all ended in the red, posting sharp to moderate losses. Greece edged up marginally.

In the UK market, Ocado Group plunged nearly 10%. Persimmon, Barratt Developments, ICP, Admiral Group, Melrose Industries, Unite Group, British Land Co., Segro, Tesco and 3I Group shed 3 to 6.5%.

Lloyds Banking Group, Haleon, IAG, Halma, Fresnillo and WPP gained 1 to 2.5%.

In the French market, Teleperformance, Faurecia, Atos, Unibail Rodamco, CapGemini, Veolia, Legrand, Safran, ArcelorMittal, Saint Gobain, Pernod Ricord, Carrefour, Societe Generale an BNP Paribas lost 1.7 to 5.2%.

Air France-KLM rallied more than 4%. Kering and L'Oreal posted modest gains.

In the German market, HeidelbergCement drifted down 4.6%. Puma, E.ON, Deutsche Wohnen, Fresenius, Vonovia, Fresenius Medical Care and MTU Aero Engines lost 2.5 to 3.4%.

BASF, Merck, Siemens and Deutsche Post also declined sharply.

Data from Destatis showed Germany's producer price inflation hit a fresh record high in August driven by energy prices. Producer prices registered an annual increase of 45.8% in August, faster than the 37.2% rise in July. The rate was forecast to ease slightly to 37.1%.

Energy prices soared 139% in August from the last year. Excluding energy, producer prices were up 14%.

On a monthly basis, producer prices gained 7.9%, the highest on record, from 5.3% in July. Economists had expected inflation to ease sharply to 1.6%.

The euro area current account balance showed the biggest deficit since late 2008, data published by the European Central Bank showed.

The current account registered an unexpected deficit of EUR 19.86 billion in July, in contrast to a surplus of EUR 4.24 billion in June. Economists had forecast a surplus of EUR 5.3 billion.

Switzerland's economy is expected to grow less than previously estimated this year and next, as the economic prospects are hampered by a tense energy situation and sharp price increases, especially in Europe.

The expert group of the federal government forecast gross domestic product to grow 2% this year instead of the 2.6% growth estimated previously in June, the State Secretariat For Economic Affairs, or SECO, said Tuesday.

Likewise, the projection for next year was downgraded notably to 1.1% from 1.9% in the summer forecast.

Switzerland's exports rebounded strongly in August, after falling for the first time in four months in July, data from the Federal Customs Administration showed.

Exports increased by a real 2.1% month-on-month in August, reversing a 3.6% fall in July. Imports also climbed 1.3% from July, when they fell by 3.3%.

In nominal terms, both exports and imports grew by 1.4% and 1.5%, respectively, in August from a month ago.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT