Major European Markets Close Lower On Geopolitical Concerns, Rate Hike Fears

The major European markets closed lower on Thursday with investors largely making cautious moves while closely following the developments on the geopolitical front and digesting the minutes from the recent policy meetings of the Federal Reserve and the European Central Bank.

Investors awaited the details of a new round of sanctions against Russia by Western nations after evidence emerged of potential war crimes committed by the Russian army in Ukraine.

Minutes from the Federal Reserve’s most recent monetary policy meeting raised expectations that the central bank might announce a few 50 basis point hikes in interest rates this year to rein in inflation.

The minutes showed that the meeting featured a continued discussion about reducing the size of the central bank’s balance sheet, with staff presenting a range of possible options for reducing the Fed’s securities holdings over time in a predictable manner, with all of the options featuring a more rapid pace of balance sheet runoff than in 2017-2019.

Many participants noted that one or more 50 basis point increases could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified, the Fed said.

European Central Bank policymakers appeared keen to roll back stimulus at their March 10 meeting and argued that conditions for lifting rates had either been met or were about to be met, the accounts of the meeting showed.

While policymakers agreed at the meeting to end bond buys some time in the third quarter, a sizable group wanted to go even further, setting a firm end-date for the purchases.

The pan European Stoxx 600 declined 0.21%. The U.K.’s FTSE 100 slid 0.47%, Germany’s DAX shed 0.52% and France’s CAC 40 ended 0.57% down, while Switzerland’s SMI bucked the trend and moved up 0.42%.

Other markets in Europe closed mixed. Austria, Finland, Netherlands, Norway, Poland and Spain drifted lower.

Czech Republic, Denmark, Greece, Russia, Sweden and Turkey closed higher, while Belgium, Iceland, Ireland and Portugal ended roughly flat.

Among UK’s FTSE 100 stocks, Aviva, Barratt Developments, Entain, ABRDN, Persimmon, Taylor Wimpey, ICP, Smurfit Kappa Group, Prudential, ICP, British American Tobacco and M&G lost 2 to 5%.

Shell ended 2% down after an announcement that it would write off between $4 and $5 billion in the value of its assets after pulling out of Russia.

Airtel Africa, Ocado Group, Sainsburry (J), AstraZeneca, Associated British Foods, Ferguson, Ashtead Group, BT Group, Spirax-Sarco Engineering and Dechra Pharmaceuticals gained 1 to 2.5%.

In the German market, Siemens, Volkswagen, HeidelbergCement, Deutsche Wohnen, MTU Aero Engines, Covestro and SAP ended with sharp to moderate losses.

Symrise gained about 2.6%. Continental and Linde advanced 2% and 1.1%, respectively. Merck and BASF also closed notably higher.

In the French market, Credit Agricole, ArcelorMittal and Atos shed 1 to 1.4%, while Faurecia, Teleperformance, Vinci, Unibail Rodamco, Sanofi, Carrefour, Bouygues, STMicroElectronics, Valeo and Danone gained 1 to 2%.

In economic releases, Eurozone retail sales rose 0.3% month-on-month in February, slightly faster than the 0.2% increase in January, data published by Eurostat showed. However, sales were slower than the expected growth of 0.6%.

Germany industrial production grew unexpectedly in February, rising 0.2% month-on-month, confounding expectations for a fall of 0.2%, data from Destatis revealed. Nonetheless, this was slower than the revised 1.4% increase posted in January.

U.K. house prices gained 1.4% in March from February, when prices were up 0.8%, survey data from the Lloyds Bank subsidiary Halifax revealed. This was the fastest growth since September. Average property price reached another new record high of GBP 282,753.