Recession Worries Keep European Stocks Under Pressure; Italy performs below average

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The graphic of the German share index DAX is pictured at the Frankfurt Stock Exchange on July 11, 2022. REUTERS/Staff

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  • Italy’s MIB index falls 2.2% on political concerns
  • Hugo Boss results are driving gains for some luxury stocks
  • TSMC results boost chipmakers

July 14 (Reuters) – European stocks fell on Thursday as rising bets of more aggressive rate hikes by the Federal Reserve led to recession fears, while Italy’s main index fell 2.2% as the country’s government faces collapse.

The pan-European STOXX 600 index (.STOXX) fell 0.7%, with losses largely broad-based. It was down 1% on Wednesday as US inflation touched a near 41-year high, spurring bets the Fed could make a bigger hike than the 75 basis point move the markets are seeing for the month had priced in. Continue reading

Global equities have taken a hit this year as central banks try to tame rising inflation, leaving investors worried about the impact on economic growth. The STOXX 600 is down about 16% so far this year, while the S&P 500 (.SPX) and a benchmark for world equities (.MIWD00000PUS) are each down about 20%.

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“Recession fears remain in the minds of investors,” said Bert Colijn, senior economist, eurozone, at ING.

But he adds that worries also stem from a wider disconnect between the European Central Bank and the Fed, as the former sticks to a 25 basis-point hike next week despite inflation at record highs.

Energy (.SXEP), banks (.SX7P) and miners (.SXPP) were among the top detractors from the STOXX 600, while defensive sectors such as healthcare (.SXDP), telecoms (.SXKP) and real estate (.SX86P) fell between 1 % and 2.3%.

Meanwhile, a euro parity with the dollar is seen as another problem for euro-zone inflation. Continue reading

At next week’s ECB meeting, investors will be on the lookout for comment on the decline in the euro and its tool to control euro-zone bond spread widening, as well as inflation forecasts and clues on the magnitude of future rate hikes. Continue reading

Italy’s MIB index (.FTMIB) neared its lowest level since November 2020 after the 5-Star Movement announced it would not take part in a parliamentary vote of confidence later in the day, a move likely to trigger the collapse of Prime Minister Mario Draghis Government. Continue reading

Italian bond yields rose sharply, widening spreads versus German counterparts.

“There will be conditionality (the ECB’s anti-fragmentation tool) meaning countries will probably have to do something before the ECB intervenes in the markets to keep spreads at acceptable levels,” said Colijn von ING .

In terms of earnings, some luxury stocks rose after German fashion house Hugo Boss (BOSSn.DE) rose 3.7% in raising its 2022 forecast.

Chipmakers rose after Taiwan’s TSMC (2330.TW) forecast revenue growth that could be the highest in 10 quarters. Continue reading

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Reporting by Susan Mathew in Bengaluru; Edited by Rashmi Aich and Krishna Chandra Eluri

Our standards: The Thomson Reuters Trust Principles.

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