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European shares dip as media stocks slide, Fed worries resurface
Global Banking & Finance Review®
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By Bansari Mayur Kamdar and Shreyashi Sanyal
(Reuters) -European shares slipped on Thursday as media stocks were weighed by declines in British education group Pearson, while data suggesting tight labour conditions in the United States raised fears about the Federal Reserve keeping rates higher for longer.
The pan-European STOXX 600 closed 0.2% lower, having climbed more than 3% in the first three sessions of 2023.
It was also the first time in the week that European shares fell on par with their Wall Street counterparts after data showed the number of Americans filing new claims for jobless benefits dropped to a three-month low last week, highlighting U.S. labour market resilience.
Another report showed U.S. private payrolls increased by 235,000 jobs last month after rising 182,000 in November, while economists had expected an increase of 150,000.
“Having slowed the pace of its rate rises to 50 bps last month the U.S. central bank appears to be in no mood to call an imminent halt to its policy of raising rates,” said Michael Hewson, chief market analyst at CMC Markets UK.
“That said, there are signs on the margins that we are seeing a rise in concern about the pace of current rate policy, and that a slower pace is required even as the end point for calling a halt gets pushed further out.”
Minutes on Wednesday from the Fed’s December policy meeting showed officials were worried about “misperception” in financial markets that their commitment to fighting inflation was flagging, though they agreed the central bank should slow the pace of its monetary policy tightening.
European media stocks fell 1.5%, with Pearson down 5.9% after Bank Of America downgraded its rating to “underperform” from “neutral”.
Retail stocks rose 2.1%, with a 6.9% jump in British clothing retailer Next, leading the gains after reporting better-than-expected fourth-quarter sales and raising its 2022-23 profit forecast.
After a rough 2022, European shares had a strong start to the year, supported by economic data showing a milder-than-expected recession and easing of price pressures in some countries, along with hopes of a post-COVID recovery in China.
UK stocks rose 0.6%, with Standard Chartered among top gainers as it jumped 6.8%.
First Abu Dhabi Bank (FAB), the United Arab Emirates’ biggest lender, said it had considered a bid for London-listed StanChart but was no longer doing so.
Separately, data showed German exports unexpectedly fell in November.
(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in BengaluruEditing by Eileen Soreng and Elaine Hardcastle)
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve economic objectives such as controlling inflation and stabilizing currency.
Employment opportunities refer to the availability of jobs in the labor market for individuals seeking work. These can vary based on economic conditions and industry demand.
Media stocks are shares of companies involved in the production and distribution of media content, including television, film, and digital platforms. Their performance can be influenced by advertising revenues and consumer trends.
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP).
The Federal Reserve, often referred to as the Fed, is the central banking system of the United States, responsible for implementing monetary policy and regulating the banking industry.
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