European equities moved lower on Wednesday as investors assessed rising energy prices, further developments in the Middle East and expectations for an interest rate increase from the European Central Bank.
The pan-European STOXX 600 declined 0.4%. Industrial, consumer discretionary and interest-rate-sensitive growth stocks were among the sectors trading lower, while energy and defence shares recorded gains.
Germany’s DAX fell 0.4%, France’s CAC 40 declined 0.6% and London’s FTSE 100 was down 0.2%.
Brent trades close to $100 amid Middle East developments
Brent crude futures rose 1.6% to $99.49 a barrel, leaving the international oil benchmark close to the $100 level.
The increase followed attacks on Tuesday by Iranian-backed Houthi forces in Yemen against several cities in Saudi Arabia.
The developments also included U.S. strikes against multiple Iranian oil tankers and an Iranian missile strike targeting a U.S. military base in Jordan.
Oil markets have also been monitoring shipping disruptions around the Strait of Hormuz and attacks affecting regional infrastructure as participants assess potential implications for Middle Eastern energy supplies.
Higher crude prices can increase energy and input costs for European companies and households, adding to the inflation considerations facing investors and policymakers.
Markets await ECB interest rate decision
Money markets were pricing in an approximately 25-basis-point interest rate increase from the European Central Bank at Thursday’s policy meeting, which would take the deposit facility rate to 2.50%.
Expectations for a rate increase followed preliminary Eurozone inflation figures showing an acceleration in headline consumer price inflation, including a double-digit increase in the energy component.
Core European sovereign bond yields remained near multi-year highs as markets assessed the potential path of interest rates and inflation.
Following Thursday’s ECB decision, investors will also be monitoring U.S. inflation data scheduled for later in the week.
Leave a Reply