Investing
European stocks stabilise after inflation-driven rout
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(Reuters) -European equities inched higher on Tuesday as investors snapped up beaten-down shares following a bruising selloff in the previous session on worries over aggressive U.S. interest rate hikes and a potential recession.
(Reuters) -European equities inched higher on Tuesday as investors snapped up beaten-down shares following a bruising selloff in the previous session on worries over aggressive U.S. interest rate hikes and a potential recession.
The continent-wide STOXX 600 index edged up 0.1% after sliding 2.4% to over three-month lows on Monday.
Battered banks and oil & gas stocks led sectoral gains in Europe, while real estate fell the most.
Wall Street’s benchmark S&P 500 index had confirmed on Monday it is in a bear market, or a 20% drop from its record closing high, on growing fears that the expected aggressive rate hikes by the U.S. Federal Reserve would push the economy into a recession. [.N]
Focus is on the Fed’s policy decision due on Wednesday, with many expecting a big three-quarter-percentage point rate hike following hot inflation print last week.
“The risks of a Fed-induced recession have increased, in our view, and the chances of a recession in the next six months have risen,” Mark Haefele, chief investment officer at UBS Global Wealth Management said in a note.
“Historically, during periods when inflation has been above 3%, value sectors have outperformed. We favor the energy sector and the UK market, which is heavily weighted to value stocks.”
Caught in a broader selloff, the benchmark STOXX 600 has shed almost 17% since hitting an all-time high in January as investors grapple with record-high inflation in the euro zone, tightening financial conditions and a slowdown in China’s economy.
Oil & gas stocks edged 0.7% higher as crude prices rose about $1 per barrel on concerns about tight global supplies. [O/R]
Among single stocks, German business software group SAP edged 0.5% higher after U.S. firm Oracle Corp post upbeat quarterly results, helped by soaring demand for its cloud products.
Shares of Atos plunged 18.7% after the French IT company revealed a plan to split its operations and sell assets as well as the departure of Chief Executive Officer Rodolphe Belmer.
Dutch paints and coatings maker Akzo Nobel dropped 5% after warning of a hit to operating income due to lockdowns in China and weak demand for decorative paints in Europe.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured annually.
A bear market is a period in which the prices of securities fall by 20% or more from recent highs, often associated with widespread pessimism.
Interest rates are the amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal.
The STOXX 600 index is a stock market index that represents the performance of 600 large, mid, and small-cap companies across 17 European countries.
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