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European stocks decline, and the dollar pauses as central banks are seen

Image: Reuters Berita 24 English - Investors watched this week's central bank meetings for hints on the direction of the market as Europ...

Image: Reuters

Berita 24 English - Investors watched this week's central bank meetings for hints on the direction of the market as European markets fell on Tuesday and the dollar lingered below last week's top.

Paris and Frankfurt indexes both declined by 0.9 percent, while the larger Euro STOXX 600 dipped by 0.6 percent.

Few urgent macroeconomic or political news items were available to traders, according to market participants, leaving them on edge.

"It's in cautious mode right now. Being short on markets and basic defence are not always the same thing "according to Unigestion's senior portfolio manager Olivier Marciot.

There are very little exposures everywhere, and risk deployment is awaiting some type of clearer direction.

The 50-country MSCI world equity index, which measures stock prices, decreased by 0.1 percent.

Wall Street futures indicators suggested modest increases. U.S. equities markets fell overnight as a result of news Apple may restrict its employment and expenditure growth in 2019.

The dollar remained slightly above a one-week low reached on Monday as it slowly declined from last week's two-decade peak.

The dollar index, which compares the value of the dollar to six other currencies, was down 0.3 percent at 107.100, a significant decline from the week's high of 109.29, which had not been seen since September 2002.

German Bund rates decreased by 2.5 basis points to 1.19 as bond markets found solace in a drop in gas prices, which had reached record highs.

Earlier, the largest MSCI index of Asia-Pacific shares outside of Japan decreased by 0.4%.

The central bank meetings scheduled for later this week were cited by market participants as potential market mover.

On Thursday, the European Central Bank and the Bank of Japan simultaneously meet. The ECB is expected to start hiking rates from their pandemic period lows with a 25 basis point boost, while the ultra-dovish BOJ is predicted to make minimal change.

After Reuters reported that ECB policymakers will consider whether to hike interest rates by 25 or 50 points at their meeting on Thursday to control record-high inflation, the euro surged 0.7 percent to $1.0223.


However, the overall picture was hazy because investors were anticipating important macroeconomic news.

At the moment, it's similar to "paint by numbers," Kerry Craig, global market strategist at JPMorgan Asset Management, said. "We don't have all the colours yet, but you have a picture to fill in."

The path of the labour market and unemployment rate in the United States, as well as whether central banks will take a step back and declare "that's the peak in inflation" and "we don't need to be as hawkish" or "we're going to be really active," are a few factors that are still unclear.

The markets anticipate a significant 75 basis point increase in interest rates at the U.S. Federal Reserve's meeting the following week, staying clear of the possibility of a huge 100 basis point increase.

The euro, which is under pressure due to rising energy prices, has somewhat recovered from its brief drop below the dollar last week, which was the first time since 2002.

According to a letter seen by Reuters, Russia's Gazprom has informed customers in Europe that it cannot guarantee gas supplies due to "extraordinary" circumstances, raising the stakes in an economic tit-for-tat with the West over Moscow's invasion of Ukraine. This move underscores the danger the euro faces.

Oil, which is likewise unsure of its path, climbed little overnight, gaining 5%. U.S. crude was up 0.2 percent lower at $102.576 while Brent crude was unchanged at $105.84 a barrel.

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