EUROPE MARKETS: DAX Slides 1% After Fed Rate-hike Worries Slap Wall Street Lower
February 22 2018 - 6:01AM
Dow Jones News
By Carla Mozee, MarketWatch
Germany business climate index falls
Stock markets across Europe dropped sharply Thursday, keying off
a reversal of gains for Wall Street in the prior session. The U.S.
stock losses came after minutes from the Federal Reserve's meeting
last month suggested more interest-rate hikes are in the
pipeline.
A downbeat reading on German business sentiment added to the
sour investing mood across the continent,as traders waited for the
release of minutes from the European Central Bank's meeting in
January.
How markets are moving
Germany's DAX 30 index slumped 1.1% to 12,335.18 after that
downbeat data, while the broader Stoxx Europe 600 index fell 1% to
377.44.
France's CAC 40 lost 0.6% to 5,266.83, and the U.K.'s FTSE 100
slid 1.1% to 7,202.18.
(http://www.marketwatch.com/story/european-stocks-struggle-as-hsbc-bhp-billiton-updates-disappoint-2018-02-20)The
euro bought $1.2288, little changed from $1.2286 late Wednesday in
New York.
The yield on the 10-year German bond fell 1 basis points to
0.70%, according to Tradeweb. Yields fall when prices rise.
What's driving markets
European equities followed U.S. stock futures lower early
Thursday
(http://www.marketwatch.com/story/dow-futures-slide-more-than-100-points-as-fed-driven-jitters-persist-2018-02-22).
U.S. stocks retreated from a rally Wednesday
(http://www.marketwatch.com/story/dow-futures-inch-lower-as-investors-brace-for-fed-minutes-2018-02-21)
after minutes of the Fed's January meeting
(https://www.federalreserve.gov/monetarypolicy/fomcminutes20180131.htm)
showed officials see an "increased likelihood" of further interest
rate hikes, heightening prospects for a rate rise in March. Policy
makers now see the U.S. economy as getting stronger than it was at
the end of 2017.
That news helped push the U.S. 10-year Treasury note yield up
closer to the 3% mark, and buoyed the U.S. dollar . In turn, the
stronger greenback pulled down prices of dollar-denominated
commodities such as copper , gold and oil
(http://www.marketwatch.com/story/oil-prices-slump-as-dollar-gets-boost-from-hawkish-fed-minutes-2018-02-22)
, which then drove a drop for shares of producers of metals and
oil.
Economic data
The minutes for the European Central Bank's meeting in January
are scheduled for release at 12:30 p.m. London time, or 7:30 a.m.
Eastern Time.
The Ifo survey out earlier in the session showed German
businesses were less enthusiastic about current conditions,
although that particular indicator still notched its second-highest
level since 1991. The business climate index fell to 115.4 points
(http://www.marketwatch.com/story/german-business-euphoria-fades-in-february-ifo-2018-02-22)
in February, below the 117.0 points expected from a FactSet
consensus poll of analysts.
The U.K.'s Office for National Statistics revised its estimate
of U.K. GDP growth
(https://www.marketwatch.com/story/uk-economy-lagged-more-than-thought-in-2017-2018-02-22https:/www.marketwatch.com/story/uk-economy-lagged-more-than-thought-in-2017-2018-02-22)
in the fourth quarter down to 1.4%, from 1.5%, year on year. The
shutdown of a major oilfield for repairs in December hit
oil-and-gas production harder than first believed, the ONS
said.
What strategists are saying
"Despite some [Fed] members advising patience, most analysts
forecast a possible shift from three to four rate hikes in 2018.
[A] March rate hike became imminent after the release of the
minutes," said IronFX senior research analyst Peter Iosif in a
note.
"The December minutes indicated that the ECB could relook at its
forward guidance in early 2018 which encouraged market participants
to believe a rate rise could be on the cards sooner rather than
later. Today, investors will be watching closely to see if the ECB
policy makers have focused more closely on this potential policy
shift," wrote City Index's senior market analyst Fiona
Cincotta.
Stock movers
Barclays shares (BCS) surged 5.2% after the bank said it would
more than double its dividend next year
(http://www.marketwatch.com/story/barclays-swings-to-loss-vows-to-double-dividend-2018-02-22-34852558)
even as the bank swung to a full-year loss of GBP1.9 billion ($2.64
billion).
Anglo American PLC shares (AAL.LN) dropped 3.9% after the miner
posted 2017 net profit of $3.17 billion
(http://www.marketwatch.com/story/anglo-american-profit-almost-doubles-in-2017-2018-02-22),
missing the $3.25 billion consensus estimate from FactSet.
British American Tobacco PLC (BATS.LN) fell 4.7%. The maker of
Lucky Strike and Dunhill cigarettes said its pretax profit
increased more than fourfold in 2017, on gains related to the
acquisition of Reynolds American Inc. and credits related to U.S.
tax reform. Volume of sales of cigarette and tobacco-heated
products fell 2.6%.
(END) Dow Jones Newswires
February 22, 2018 05:46 ET (10:46 GMT)
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