European Markets Fall On Hawkish ECB Stance

Bridgette Randall
19 Jan, 2023
Frankfurt

European markets fell more than 1% after six-days of gains after hawkish comments from the central bankers dented market sentiment. 

European Central Bank President Lagarde reiterated the central bank's commitment in lowering rates to 2% "in a timely manner" at a gathering of business executives in Davos, Switzerland.  

European policymaker and Dutch central bank governor Klaas Knot also reiterated ECB's commitment in raising rates in 50 basis points increment and keeping the hawkish stance intact. 

Tough talks from two central bankers shifted investors attention from economic growth to the implications of rising rates on the region's economy.   

 

European Indexes Halt Weekly Advance 

The DAX index declined 1.4% to 14,962.49, the CAC-40 index fell 1.6% to 6,967.94 and the FTSE 100 index declined 0.9% to 6,967.94. 

 

Rate Path Expectations Lift Euro and Pound 

The euro traded near $1.078, the British pound edged higher to $1.23 and the Swiss franc edged lower to 91.63 U.S. cents. 

 

Europe Bond Yields Drift Lower 

The yield on 10-year German Bunds inched lower to 2.04%, French bonds to 2.46% UK Gilts to 3.30% and Italian bonds to 3.77%. 

 

Oil Prices Stay Elevated On China Recovery Hopes   

Brent crude oil price edged higher 70 cents to $85.71 a barrel and the Dutch TTF natural gas futures contract price for immediate month delivery declined 4% to 59.08 per MWh. 

 

Europe Stock Movers 

Informa plc increased 0.4% to 662.74 pence after the event management and academic publishing company said revenue and adjusted earnings are expected to increase in 2022. 

In its annual trading update released Thursday, the company estimated 2022 revenue of £2.38 billion, adjusted operating profit of £530 million and free cash flow of £440 million.  

Melrose Industries PLC decreased 2.2% to 146.49 pence and the company said GKN divisions operating performance is in-line with management expectations. 

The aerospace industry focused holding company revenues rose more than expected 6% and operating profit surged 21% from a year ago. 

On September 8, 2022 Melrose announced its plan to separate its GKN Automotive and GKN Powder  Metallurgy businesses from the Melrose Group by way of a demerger of  shares in a new holding company to Melrose shareholders.