European Stocks Lower; Sentiment Hit by ECB Tightening Pledge

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European Stocks Lower; Sentiment Hit by ECB Tightening Pledge
Credit: © Reuters.

By Peter Nurse 

Investing.com - European stock markets weakened Friday as investors digested the rate hike guidance from the European Central Bank ahead of the release of key U.S. inflation data.

By 3:40 AM ET (0740 GMT), the DAX in Germany traded 1.3% lower, the CAC 40 in France fell 1.1%, and the U.K.’s FTSE 100 dropped 0.8%.

The European Central Bank confirmed on Thursday it will end its long-running bond-buying scheme at the start of next month and said it would raise rates by 25 basis points in July, and again in September, potentially by a larger amount as it battles soaring inflation. 

The possibility of a more aggressive hiking cycle later in the year is weighing on sentiment as the Eurozone economy struggles with slowing growth, exacerbated by the war in Ukraine, as well as rampant price increases.

The Deutsche Bundesbank on Friday slashed its German growth forecast for 2022 and the next two years, saying that the war in Ukraine and ongoing high inflation look set to weigh on Europe’s largest economy for the foreseeable future.

Investors have been focused for months on how quickly central banks will try to normalize monetary policy to curb inflation. The Federal Reserve meets next week and this puts the U.S. May CPI release later in the session firmly in the spotlight.

In corporate news, Credit Suisse (SIX: CSGN ) stock fell 5.7% after State Street (NYSE: STT ) stated late Thursday that it is not looking to buy the embattled Swiss lender, its first outright dismissal of a news report that it was seeking a deal.

GSK (LON: GSK ) stock rose 1.6% after the drugmaker said its vaccine targeting a respiratory virus in older adults each year delivered positive results in a trial.

Just Eat Takeaway (AS: TKWY ) stock rose 4.8% after Bloomberg reported that the food delivery company’s U.S. unit Grubhub is attracting preliminary interest from private equity firms. 

Oil prices retreated Friday as the return of new partial lockdowns in China raised fears of reduced demand from the world’s largest crude importer.

Shanghai imposed new mobility curbs on Thursday after China’s largest economic hub recorded a cluster outbreak of COVID-19, just over a week after the country’s most populous city ended a prolonged lockdown.

That said, Brent was still on track for a fourth consecutive weekly gain and WTI for a seventh straight weekly increase with global supply tight and demand from the U.S., the world’s biggest consumer, remaining very healthy.

Both benchmarks on Wednesday marked their highest closes since March 8, when they hit their highest settlements since 2008.

By 3:40 AM ET, U.S. crude futures traded 0.6% lower at $120.83 a barrel, while the Brent contract fell 0.6% to $122.38. 

Additionally, gold futures fell 0.2% to $1,849.35/oz, while EUR/USD traded 0.2% higher at 1.0634.

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