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Eurozone shares fell by 1% in two weeks, today, Friday, June 10, 2022 07:12 pm
The Eurozone stock index STOXX (.STOXXE), which recouped nearly all of the session’s losses after the central bank kept its benchmark interest rate unchanged, quickly reversed course and fell 1.6%. All major bourses in Europe fell 1% or more, with Italy’s MIB (.FTMIB) shedding 1.9%.
The central bank said it will end its long-term bond-buying plan on July 1, and raise interest rates by 25 basis points – for the first time in a decade – next month and possibly by a larger margin in September.
“They have added an explicit warning that they may consider a larger increase that could be justified in September, depending on inflation expectations by then,” added Bas van Geffen, chief macroeconomic analyst at Rabobank.
The European Central Bank noted that inflation has averaged 6.8% this year, well above the 5.1% forecast in March plus a target rate of 2%, while economic growth for the year has been cut to 2.8% from a previous forecast of 3.7%.
Bond yields rose across southern Europe. The Italian 10-year bond yield rose more than 20 basis points and reached its highest level since 2018.
The losses in Europe were quite widespread.. The region’s banks (.SX7P), which will be the first beneficiaries of higher interest rates, also fell 1.2%.
“Banks have seen a good rally until today when the European Central Bank basically ruled out the possibility of a 50 basis point increase next month,” said David Madden, market analyst at Equiti Capital.
The US central bank indicated a rate hike this month and next, likely by 50 basis points, before pausing to check the data. But the stakes are so high that more will follow.Quoted from Archyde.com