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European stocks slide on Fed rate-rise fears


European stock markets PHOTO:AFP

European stock markets slid on Thursday after Federal Reserve minutes fanned expectations that US interest rates would rise further and faster than previously thought.

Wall Street opened higher, paring its previous day’s losses seen on the Fed news which also pushed Asian markets deep into the red.

London’s benchmark FTSE 100 index underperformed its European peers as investors also grappled with a raft of company results and a slight downgrading of 2017 UK growth.

The much-anticipated notes from the Fed’s January policy meeting showed the board thought Donald Trump’s sweeping tax cuts would fire up the already humming economy, pushing inflation higher.

Analysts speculated that the Fed would lift interest rates at its next meeting in March, but there is debate about whether it will now carry out four increases this year in light of the recent spate of strong data, instead of the three that many have been predicting.

“Our take is that the minutes reflect events prior to the jump in hourly earnings seen in the January jobs report and also prior to the extra spending bill passed by Congress early in February,” said Rodrigo Catril, forex strategist at National Australia Bank.

“This would suggest that there is a good chance that the current FOMC thinking has evolved towards a more hawkish tone since.”

– Cheap credit –
In London, stocks of energy provider Centrica were the big risers, helping to bolster the market after delivering results that were not as bad as feared.

Despite reporting a hefty loss, banking giant Barclays also rose as investors bet on it increasing its dividend this year and conducting more share buybacks.

The news from the Fed on Wednesday pushed the key 10-year US Treasury yield to a four-year high and boosted the dollar but sent US equities into reverse with all three main indices ending in negative territory.

Investors have been on edge since the start of this month when global markets were sent spinning by a strong US jobs and wages report that fuelled talk of tighter borrowing costs.

Equities around the world have surged to all-time highs thanks to a years-long rally built on cheap credit from crisis-era stimulus. But with economies globally improving, central banks are beginning to wind those policies in.

In Asia, Tokyo ended 1.1 percent lower and Hong Kong fell 1.5 percent but Shanghai jumped more than two percent as mainland traders returned from a week-long break for the Lunar New Year celebrations.

The dollar, which had been recovering against its major peers in previous sessions, paused Thursday, when it lost ground against the euro and the yen, which is considered a safe-haven asset in times of volatility and uncertainty.

– Key figures around 1430 GMT –
London – FTSE 100: DOWN 1.0 percent at 7,207.80

Frankfurt – DAX 30: DOWN 0.7 percent at 12,384.51

Paris – CAC 40: DOWN 0.4 percent at 5,291.05

EURO STOXX 50: DOWN 0.5 percent at 3,414.61

New York – DOW: UP 0.4 percent at 24,889,17

Tokyo – Nikkei 225: DOWN 1.1 percent at 21,736.44 (close)

Hong Kong – Hang Seng: DOWN 1.5 percent at 30,965.68 (close)

Shanghai – Composite: UP 2.2 percent at 3,268.56 (close)

Euro/dollar: UP at $1.2323 from $1.2284 at 2200 GMT

Pound/dollar: UP at $1.3936 from $1.3918

Dollar/yen: DOWN at 107.33 yen from 107.78 yen

Oil – West Texas Intermediate: UP 27 cents at $61.95 per barrel

Oil – Brent North Sea: UP 14 cents at $65.56 per barrel

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