European stock indices fall on Monday on growing fears that the tightening of policy by the world’s largest central banks will continue to put pressure on the global economy.
The composite index of the largest enterprises in the region Stoxx Europe 600 as of 12:35 CSK fell by 1% to 421.71 points.
The German DAX index is losing 1.36%, the French CAC 40 – 1.52%, the Italian FTSE MIB – 1%, the Spanish IBEX 35 – 1.15%. UK stock exchanges are closed on Monday (Summer Bank Holiday).
“Today the markets are focusing on the message from Jackson Hole about a ‘coordinated tightening’ of policy. Treasury bond yields are rising and risky assets are getting cheaper,” said Danske Bank experts, quoted by Dow Jones.
Federal Reserve Chairman Jerome Powell, speaking Friday at an economic symposium in Jackson Hole, reaffirmed the US central bank’s determination to continue tightening monetary policy to bring inflation under control.
“We are purposefully moving our policies to a point where they will severely restrict economic activity,” Powell said.
“Higher rates, slower economic growth and a weaker labor market will contain inflation, but will also cause some pain for households and businesses. This is the sad price of reducing inflation. However, failure to restore price stability will mean even more serious pain,” he said.
Representatives of the European Central Bank (ECB) warned at Jackson Hole that the ECB’s monetary policy is likely to remain tight for an extended period of time.
ECB executive board member Isabelle Schnabel said tightening policy would require global central banks to “sacrifice” more in terms of economic consequences than in the past, as the “globalization of inflation” makes it harder for central banks to keep inflation under control, the Financial Times writes.
The head of the Bank of France, Francois Villeroy de Galo, in turn, said that there should be no doubt about the ECB’s readiness to raise key interest rates above the so-called “neutral” level, which does not constrain, but does not limit economic activity.
He noted that rates could reach the level of 1-2% by the end of this year.
Shares of energy and utility companies, as well as chemical producers, fell sharply on Monday amid persistently high gas prices.
The value of shares of French Engie SA and Veolia Environment SA fell by 3.8% and 2.4% respectively, German RWE AG and Bayer AG – by 2.1% and 3%, Italian Enel SpA – by 1.8%, Spanish Iberdrola SA – by 1.1%.
The decline leaders in Germany are shares of Infineon Technologies (-3.9%), Deutsche Post (-2.5%) and HeidelbergCement (-2.3%), in France – Cie de Saint-Gobain (-2.6%) and Kering (-2.5%).
Luxury goods makers LVMH and Hermes lost 2.2% and 1.7%, respectively, on weaker consumer spending forecasts in Europe and expectations of a further slowdown in the Chinese economy.
