European stock markets rose on Monday after the biggest weekly drop for global stocks since a pandemic-induced auction in March 2020.
As traders review economic data and US Federal Reserve Chairman Jay Powell’s congressional appearance could highlight the US central bank’s determination to fight inflation With the rate hike, the Stoxx 600 stock index in the region was up 0.7% in volatile trade.
Sean Darby, strategist at Jefferies, warns investors not to expect much of a long-term respite for European stock markethowever, with interest rates “set to climb” as “growth slows down”, a situation he describes as a “perfect macro storm”. Stoxx is down nearly 17% so far this year.
London’s FTSE 100 rose 1.3% on Monday as shares of energy producers rose, recovering from a slump on economic growth concerns. Shares of Royal Dutch Shell, a key component of Britain’s blue-chip index, rose 3.7% after falling nearly 13% in the week to June 17.
The FTSE All-World Index, a gauge of emerging and developed markets, fell the most since March 2020 last week, with a drop of 5.7%. US stocks also suffered their worst weekly losses since the outbreak of the coronavirus pandemic.
The Share refuse boosted by an increasingly bleak global market outlook, as the Bank of England and the Swiss National Bank followed the Federal Reserve in raising interest rates last week in an attempt to tackle inflation. skyrocketed.
Investors also expect to be listed company’s income decrease due to higher consumer and producer prices and weaker consumer spending. Wall Street’s S&P 500 index ended last week nearly 25% below its January high.
“I think we are in the middle of two corrections for global equities,” said Francesco Sandrini, head of multi-asset strategy at Amundi.
“The first 20% of a stock market crash is due to valuation,” he said, referring to how higher interest rates are. decrease in net present value future returns of the company in the investor’s model.
“We could see 10% more [drop] relative to earnings, reflecting continued inflation and increased recession risk,” Sandrini added.
Global purchasing managers’ surveys on Thursday will provide insights into how companies worldwide are coping with higher fuel prices and the supply chain disruptions caused by Russia’s invasion of Ukraine and China’s coronavirus lockdown.
Powell will testify before Congress on Wednesday and Thursday after the world’s most influential central bank raised its key interest rate by 0.75 percentage points last week – the first increase since 1994.
On Saturday, Fed governor Christopher Waller expressed support for another 0.75 percentage point increase in July. The annual pace of US consumer price inflation accelerated to a 40-year high of 8.6% in May, with Waller remarking that the central bank is “all set to reestablish stability”. price”.
The euro rose 0.2% against the dollar to $1.05, considering potential instability caused by French president Emmanuel Macron lose the majority in the National Assembly of France. Brent crude, the oil benchmark, was unchanged at $113 a barrel.
Analysts at ING said the latest political developments in Paris “will make the country much less regulated and could put structural reform at risk”.
In Asia, Hong Kong’s Hang Seng index gained 0.4% and Japan’s Nikkei 225 lost 0.7%.
