On Wednesday, European stocks hit new lows of one year, as commodity-related stocks suffered due to a fall in metal and oil prices. Meanwhile, hot inflation numbers in the United Kingdom fueled worries about an economic slowdown on a global scale.
Global Equities React
Last week, global equities had seen a volatile sell-off due to concerns that an aggressive monetary tightening policy by central banks for reducing inflation would result in a sharp downturn in the economy. However, there was some stability seen in the last two sessions. There was a 1.7% drop in the STOXX 600 index, as it reached a new low since last year in February. This occurred after a rally in the pan-European index for three days.
There was a 3.7% drop in the oil and gas index, as there was a fall in oil prices by more than $6 per barrel, due to a decision by US President Joe Biden about cutting drivers’ fuel costs. There was also a 4.1% decline in miners, as a strong US dollar brought down metal prices due to a global economic slowdown.
The least decline was recorded in food and beverage and defensive telecoms stocks. Market analysts said that there is a new monetary environment that markets have to adjust to and the next few quarters could also see a slowdown in growth, which does not do stock markets any good. They said that there are some companies that seem very attractive and people want to invest in them in the long-term.
However, worries about slowing growth and tightening monetary policies are keeping them at bay. The STOXX 600 index has declined by 18.8% in the year since January 4th, when it had hit a closing high. This mostly occurred because of tightening monetary policies, a slowdown in the economy of China, the Russia and Ukraine conflict and rising inflation.
British Inflation Rises
Data showed that the consumer price inflation in the United Kingdom had hit a 40 year high in the previous month due to rising food prices. The inflation hit 9.1%, which underlines just how severe the cost of living crisis has become. The FTSE 100 blue-chip index in the UK saw a drop of 1.3%, as losses on the index were significantly limited because of a weaker pound.
A 5.2% decline was recorded in BASF amongst individual stocks, after the chief executive of the German chemical group stated that the second half of the year would lead to a significant downturn. JPMorgan downgraded the stocks of European steel firms like Salzgitter, Voestalpine and ArcelorMittal. They fell between the range of 8.3% and 13.5%. JPMorgran stated that steel prices have not yet hit bottom, due to which the companies are likely in for more pain down the road.
There was a 6.1% decline recorded in the largest fish farmer in the world, Mowi. Based in Norway, the company recorded the fall after share placing, as uncertainty continues to mount in the markets.