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Updated January 17th, 2024 at 19:30 IST

European shares slump on hawkish ECB remarks, disappointing China data

Economic data from China revealed a slower-than-expected growth rate for the fourth quarter.

Reported by: Business Desk
Euro Zone: The ECB is anticipated to lead the charge in rate reductions next year as economic prospects dim. It kept its deposit rate stable at 4 per cent.
ECB | Image:Pexels
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European shares slump: European shares faced a sharp downturn on Wednesday as a series of more hawkish statements from European Central Bank (ECB) officials tempered expectations for interest rate cuts. The pan-European STOXX 600 index plummeted by 1.2 per cent as of 0814 GMT, marking its lowest level in over a month.

ECB President Christine Lagarde emphasised that the central bank is committed to bringing inflation back to its 2 per cent target, cautioning that the victory over economic challenges has not been secured yet. In alignment with this sentiment, Dutch central bank chief Klaas Knot expressed scepticism about any rate changes in the first half of 2024.

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Shift in rate-cut

Market dynamics indicate a shift in rate-cut expectations, with traders now postponing anticipated cuts from March to April. However, there is still an estimation of a total interest rate reduction of approximately 150 basis points throughout the year.

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Adding to the negative sentiment, economic data from China revealed a slower-than-expected growth rate for the fourth quarter, contributing to the risk-averse stance among equity investors. Luxury stocks with exposure to China, such as LVMH and Kering, experienced declines of 1.6 per cent and 2.0 per cent, respectively.

In other notable market movements, Worldline saw a 2.6 per cent increase following reports that the payments group is exploring strategic options to reassure shareholders and prevent a potential hostile takeover. This development underscores the volatility and strategic considerations present in the current market landscape. Investors are closely monitoring central bank communications and global economic indicators for insights into potential shifts in monetary policies and their impact on equity markets.

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(with Reuters inputs)

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Published January 17th, 2024 at 19:30 IST

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