Markets

European stocks see a reduction in losses after the ECB raises its rate as expected. Stocksak


© Stocksak. The graph of the German share price index DAX is pictured at Frankfurt Stock Exchange, Germany, October 26, 2022. REUTERS/Staff

By Ankika Biswas and Sruthi Shankar

(Stocksak). European stocks saw losses fall on Thursday after the European Central Bank increased interest rates by 75 basis point, matching market expectations. It also signalled the need to hike further to lower record-high inflation.

Following the announcement, the eurozone stocks index dropped 0.5%. It had fallen as much as 1.2% before. Data showing that the United States experienced a stronger third quarter than expected gave markets a boost.

The ECB increased its deposit rate by 75 basis point to 1.5%. This brings the total increase to 2 percentage point over three meetings.

“This is exactly what we expected, 75 basis point. The bottom line is that Interactive Brokers (NASDAQ) has added the ECB to the program – aggressively increasing rates to fight inflation.” Steve Sosnick, chief strategy officer at Interactive Brokers (NASDAQ), stated that this was what we expected.

The central bank also reduced the subsidy to banks by 2.1 trillion euros worth ultra-cheap 3-year loans called Targeted Langer-Term Refinancing Operas or TLTROs. However, it did not mention any plans to wind down its bond holdings.

The rate-sensitive euro area banks index fell 0.3%, but was still below its session lows of 1.4%.

“I doubt that the TLTRO move was fully priced-in,” Sosnick said. Sosnick explained that the European banks are now bearing the brunt.

Now, attention turns to Christine Lagarde, President of the ECB, at 1245 GMT.

The pan-European Index fell 0.3% after closing at a five week high in the previous session. This was due to expectations that major central banks would slow down the pace of interest rate hikes.

Credit Suisse plunged 13.8% after the bank announced it would raise 4 Billion Swiss Francs ($4.05Billion), eliminate thousands of jobs and shift its attention to its rich clients, instead of investment banking. The move was part of its efforts to end years of scandals.

Shell (LON.) rose 5% after the energy company posted a profit of $9.45 Billion and announced plans to increase its dividend by year end. TotalEnergies in France gained 2.8% following a jump on third-quarter net profit.

The two companies helped lift Europe’s oil & gas sector by 2.8%

Technology stocks were still under pressure. STMicroelectronics, a Franco-Italian chipmaker, fell 7.6% after it predicted that sales growth would slow in the second half of the year.

Miners also took a big hit Anglo American (LON:) fell 4.2% following a decline in production. The third-quarter output was broadly the same as last year.

($1 = 0.9873 Swiss francs)

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