European markets close lower as hawkish Fed sends global stocks lower

European stocks closed lower on Friday after Federal Reserve Chairman Jerome Powell said a half percentage point interest rate hike is “on the table” for next month.

The pan-European Stoxx 600 closed down 1.8%, with mining shares tumbling 3.6% to lead losses as all sectors fell into the red.

Friday’s trading in Europe comes after a sharp turnaround in US stock markets on Thursday, with major averages closing lower and snapping earlier gains.

The markets are… having to digest a much steeper and faster rate path than they thought a week ago, a month ago or three months ago.

Daniel Morris

Chief Market Strategist, BNP Paribas Asset Management

Earlier on Thursday, Federal Reserve Chairman Jerome Powell commented on the possibility of a larger-than-usual rate hike next month, spooking markets. Speaking during an International Monetary Fund panel moderated by CNBC’s Sara Eisen, Powell said controlling inflation is “absolutely essential.”

“I would say that 50 basis points will be on the table for the May meeting,” he added.

Powell’s comments also sent US Treasury yields sharply higher.

On Friday, Asian stocks mostly fell amid fears over higher interest rates, while on Wall Street the main US indexes also fell.

“Markets are… having to digest a much steeper and faster rate path than they thought was the case a week ago, a month ago, or three months ago. So I think that adjustment is still happening.” . Daniel Morris, chief market strategist at BNP Paribas Asset Management, told CNBC on Friday.

“I think the key question for the direction of the markets is going to be: when does that process stop? When are we going to have enough and full price of where are rates going to be in a year? And I think once that happens, and Hopefully that’s soon, then we’ll see a real stabilization in the markets.”

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Stock Movements

In the retail space, B&M sank 6% on news that its chief executive will retire next year. Furthermore, data released from the UK showed that retail sales volumes fell more than expected in the month of March.

“March’s substantial drop in retail sales volumes looks like the beginning of a period of weakness in consumer spending, rather than just a problem,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said in a recent interview. note Friday.

Shares of French luxury retailer Kering also fell more than 4% amid concerns about its sales performance in China, where a zero-Covid policy worries investors.

SAP released its earnings on Friday, signaling a hit to revenue from its exit from Russia. The German software giant said its decision to leave Russia following the Ukraine invasion was expected to have a negative impact on revenue of around 300 million euros ($325 million).

Speaking to CNBC on Friday, the company’s CEO, Christian Klein, told CNBC that its cloud subscription revenue was “very tough” and said its transformation plan was ahead of schedule. The firm’s shares closed down more than 1%.

french elections

French voters head to the polls on Sunday. The second and final round of the election pits incumbent Emmanuel Macron against anti-immigration party leader Marine Le Pen.

In a note on Thursday, Goldman Sachs described the elections as a defining moment for French politics.

“If Mr Macron is re-elected, we would expect him to revive his reformist agenda as a continuation of his pro-integration plan for Europe,” the analysts, led by Sven Jari Stehn, said.

“These reforms are largely embedded in our current forecasts. If M. Le Pen were elected, we would expect an institutional deadlock due to the likely lack of a parliamentary majority in the legislative elections next June and significant friction with partners in the EU”.

— CNBC.com staff contributed to this report.

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