On Tuesday, European shares recorded a fall because of worries about the impact on economic growth because of an aggressive tightening of monetary policy. It is expected that central banks will begin hiking up interest rates in order to tame the inflation numbers. There was a 0.5% in the STOXX 600 index, as it lost half of the gains it had made on Monday and the decline was led by tech shares. The Australian central bank also hiked up its interest rates, which is the biggest increase recorded in over 22 years. It also announced further tightening in light of the rising inflation.
In other events, US inflation data is to be released on Friday, while the European Central Bank (ECB) will also have a policy meeting on Thursday. The ECB has already said that hike in interest rate would begin next month, but inflation numbers for May turned out to be record high. Therefore, investors are waiting to see if the ECB would change its stance in the policy meeting. There is a greater possibility of the stance turning hawkish in Thursday’s meeting. Market strategists said that most investors were wondering why the ECB wants to wait until July to hike interest rates.
As for the US inflation data scheduled for a release on Friday, it is expected to show a rise in consumer prices in May, which has led to speculation that the Federal Reserve will continue its rate hikes beyond July. A slowdown in economic growth was recorded in Germany, as the decline in industrial orders was more than expected. It is the third fall to happen because of the increasing uncertainty brought on by the Ukraine-Russia conflict and weak demand. There was also a 1.1% drop in technology stocks that are sensitive to interest rates.
A 2.5% fall in shares of Dassault Systemes was recorded, as the French software maker’s stock was downgraded by a brokerage. The performance of London’s FTSE index was slightly better, as it was trading flat after a decline in the pound. After the UK Prime Minister, Boris Johnson pulled through a no-confidence vote on Monday, he is planning to introduce a bunch of new policies for strengthening his position. Market analysts said that they expected volatility to go down in the next few days, as the impact of the political turmoil in the UK would not be that significant on the economy.
There was a 28.4% increase in the Biffa stock, after Energy Capital Partners made a buyout offer of about 1.36 billion pounds, or $1.69 billion. There was also a 21.2% drop in the value of Ted Baker, after the British fashion chain announced that its bidder had backed away. There was also a 9.5% slump in SAS after the Swedish government announced that it did not have any plans of adding new capital to the airline. Plus, it also added that it was not going to be a long-term shareholder of the loss-making company.