Published by Jessica Weisman-Pitts
Posted on September 20, 2022
By Shreyashi Sanyal and Susan Mathew
(Reuters) -European shares closed at 11-week lows on Tuesday, extending declines to a sixth straight session, as expectations of another large interest rate hike by the U.S. Federal Reserve kept risk-taking bets in check.
The pan-European STOXX 600 which had risen as much as 1% earlier in the session, ended down 1.1% with nearly all major sectors in the red.
Real estate stocks slumped 4.1% led by Swedish names after Riksbank kicked off a central bank heavy week with a surprise 1 percentage point hike in interest rates.
As the move could exacerbate the challenges facing the heavily leveraged real estate industry, Stockholm-listed Fastighets AB Balder, Wallenstam and Sagax, dropped between 6% and 7%.
Sweden’s main stock index slumped 2.0% to hit near two-year lows.
On Wednesday, the Fed is likely deliver its third straight 75 basis point interest rate hike, maintaining its tough stance on persistent inflation.
Markets will also be watching the Bank of England’s policy decision, split on whether it will hike by 50 or 75 bps on Thursday.
“The prospect of hefty rate hikes and hawkish rhetoric from the FOMC and Bank of England gives little room for optimism,” said Joshua Mahony, senior market analyst at IG, also citing geopolitical tensions between the United States and China over Taiwan as weighing on sentiment.
The European Central Bank had earlier in the month raised its lending rate by 75 bps.
The STOXX 600 has lost 17% so far this year as the war between Russia and Ukraine bolstered inflation in a post pandemic environment, sending central banks scrambling to rein in prices, and sapping risk appetite as investors worried about the possibility of a consequent recession.
Amid an energy crisis in Europe, German utilities RWE and Uniper got closer to striking long-term deals to buy liquefied natural gas from Qatar’s North Field Expansion project to help replace Russian gas, sources said.
Another source said, the German government is expected to announce an agreement on nationalising Uniper on Wednesday.
Shares of Uniper and parent Fortum gained between 3.8% and 9.5%, respectively.
German data, meanwhile, showed producer prices rose in August at their strongest rate since records began both in annual and monthly terms, driven mainly by soaring energy prices.
On the other hand, topping the STOXX 600 were shares of Bachem Holding up 14.0%, after the Swiss biotech supplier signed two new contracts for peptides.
(Reporting by Shreyashi Sanyal, Johann M. Cherian and Susan Mathew in Bengaluru; Editing by Sriraj Kalluvila/Savio D’Souza/Ken Ferris)
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