With the latest comments by European Central Bank (ECB) and Bank of England officials putting something of a dampener on holiday spirits, stocks tumbled across global financial markets on Thursday.
Both central banks announced 50 basis point rate hikes, the latest in a string of such moves this year aimed at curbing once-in-a-generation levels of inflation. And while the latest rates decisions had been widely anticipated, both institutions made clear that more pain lies ahead.
The ECB published new forecasts showing that Frankfurt now expects euro zone inflation to remain above its 2 per cent target until 2025, higher and longer than had previously been anticipated. The Bank of England, meanwhile, indicated that it expects the UK economy will be mired in recession for “a prolonged period”.
DUBLIN
On low, end-of-year volumes, the Iseq index finished the session down 2.5 per cent, slightly better than its European peers as the mood soured across the continent’s financial centres following the ECB decision and stark economic forecasts.
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Building materials giant CRH, down more than 20 per cent in 2022 so far, fell 3.8 per cent to finish the session at €36.62. Insulation maker Kingspan also fell 3.6 per cent to close at just over €51.60 per share.
Permanent TSB was unchanged at €1.80. Bank of Ireland, meanwhile, was a half of a percentage point up at €7.86, while AIB gave up 1.37 per cent to close the session at €3.17.
The leisure sector also took a hit with Paddy Power-owner Flutter among the biggest fallers on the day, down 4.4 per cent to €133.60.
LONDON
The Bank of England’s decision to raise rates by 50 basis points to 3.5 per cent had largely been anticipated by investors, and London indices moved only slightly on the announcement.
However, minutes of the monetary policy committee shows that officials are forecasting a “prolonged” period of recession. The minutes also indicate division among policymakers, with some voting for an outsize 75-basis points rise while others said now was the time to stop tightening monetary policy altogether, with data indicating that inflation has peaked.
Outperforming their European counterparts, London’s blue-chip FTSE 100 index shed 0.9 per cent, while the FTSE 250, a more domestic-focused index of mid-cap stocks, was down 0.8 per cent.
Airlines performed well after oil prices fell following the US Federal Reserve’s Wednesday rates hike. Aer Lingus-owner IAG gained 2.1 per cent, while EasyJet added 3.9 per cent.
Moving in the opposite direction, travel group TUI shed another 1.8 per cent on Thursday following the announcement by the world’s biggest holiday’s company on Wednesday that it plans to repay Covid supports through a capital raise.
Retail technology company Ocado was among the biggest losers, shedding close to 4.2 per cent, while UK bank and energy stocks also showed softness.
EUROPE
European markets were a sea of red following the ECB’s latest rates decision and comments from its president, Christine Lagarde, indicating that further hikes could be just around the corner.
The pan-European Stoxx 600 index gave up close to 2.9 per cent, while the blue-chip Stoxx 50 shed more than 3.5 per cent. The French Cac 40 and the German Dax index were both down more than 3 per cent.
Consumer and luxury goods companies were among the biggest fallers on the day as investors bet that higher-than-expected inflation will continue to eat away at disposable incomes. Hermés and EssilorLuxottica both shed close to 5 per cent, L’Oréal gave up 4.6 per cent and Adidas shed 4.3 per cent.
Louis Vuitton was off by 3.6 per cent, while carmakers BMW, Volkswagen and Daimler were down between 1.3 per cent 3.8 per cent.
NEW YORK
Wall Street stocks fell sharply, with the Dow Jones on track for its steepest single-day fall in more than three months. The tech-heavy Nasdaq 100 dropped more than 3 per cent, while the S&P 500 suffered its biggest intraday slide in more than a month.
Both indices had ended Wednesday in the red after Fed chairman Jerome Powell reiterated his hawkish stance and policymakers signalled a peak rate that was above market expectations.
Shares of mega-cap companies such as Apple, Amazon and Microsoft dropped over 3 per cent each.
Netflix slumped 7.7 per cent after a media report that the company would let its advertisers take their money back after missing viewership targets.
Additional reporting, Reuters
