European shares record marginal slide amid speculation of Fed rate hike
European stocks were little changed as investors weighed the possibility of the Federal Reserve increasing interest rates sooner than had been expected.
The Stoxx Europe 600 Index fell 0.1 percent to 334.46 at 2:18 p.m. in London. The equity benchmark has lost momentum since an April 20 peak as concerns about slowing global growth and worries over central-bank policies resurfaced amid mixed earnings reports. The index has gone almost a month without ending at least 1 percent higher, signaling a lack of triggers to boost shares.
Expectations for the U.S. central bank to add to last December’s interest-rate increase are starting to build after higher-than-expected consumer-price data, with comments from Fed presidents Dennis Lockhart and John Williams that at least two interest-rate increases may be warranted this year also stoking speculation of a move.
“We just appear to be chopping around at the moment in the absence of any real certainty and that’s likely to be the case at least for the next few weeks,” said Michael Hewson, a London-based market analyst at CMC Markets Plc. “The Fed talking up rate-hike expectations is certainly having a negative effect on equity markets because the markets have been pricing in potentially one rate rise this year. Certainly not one in June and maybe one in December and yet you have Fed officials talking about two or three rate hikes.”
Investors are also awaiting minutes from the Fed’s April meeting, which are due after the close of European markets today. Traders have boosted the probability the central bank will increase rates in June to 16 percent, up from 4 percent earlier this week. The first month with even odds of higher borrowing costs also moved up to September from December.
Goldman Sachs Group Inc. has cut its rating on equities to neutral, warning that stocks won’t be attractive until they exhibit sustained earnings growth. The key risks are a slowdown in China, increased European political uncertainty, falling commodity prices and changes in the Fed’s interest-rate cycle, according to a strategists’ note.
Among stocks moving on corporate news, Burberry Group Plc dropped 3.8 percent after the luxury-goods retailer posted a second straight drop in annual profit and cut its outlook. Sonova Holding AG tumbled 6.7 percent after the Swiss hearing-aid maker’s second-half earnings missed estimates.
Kuka AG jumped 29 percent after Midea Group Co. offered to raise its stake in the industrial-robot maker to become its largest shareholder, valuing the German company at 4.6 billion euros ($5.2 billion).
A gauge of mining-related companies posted the biggest decline of the 19 industry groups on the Stoxx 600 as metals prices retreated.
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