European stocks closed noticeably lower on Monday as investors were wary of any big buying ahead of monetary policy decisions from the Federal Reserve, Bank of England (BoE) and Bank of Japan (BoJ).
The BoE is set to end its tightening cycle with a final rate hike this week, as any further increases will weigh on the UK. economy in a deep recession.
Record wage growth as well as persistently high inflation have reinforced calls for further policy tightening. However, past rate hikes have started to dampen economic activity. Recent economic indicators suggest that the economy has entered a mild recession.
Markets widely expect a quarter-point rise on September 21, a day after the release of consumer price inflation data.
The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank’s projections for clues on the rate outlook.
While CME Group’s FedWatch tool currently shows a 99% chance the Fed will leave rates unchanged this week, the outlook for the November meeting is a bit more mixed. The FedWatch tool shows a 68.4% chance of rates remaining unchanged in November, but a 31.3% chance of another quarter-point rate hike.
The German economy is expected to contract slightly in the third quarter as private consumption is unlikely to make a positive contribution, the Bundesbank said in its monthly report published on Monday.
The pan-European Stoxx 600 index lost 1.13%. The British FTSE 100 index fell 0.76%, the German DAX 1.05% and the French CAC 40 1.39%, while the Swiss SMI closed 0.96% lower.
Among others markets In Europe, Austria, Belgium, Denmark, Finland, Greece, the Netherlands, Poland, Portugal, Russia, Spain, Sweden and Turkey closed with strong to moderate losses .
Iceland and Norway fell slightly, while Ireland closed slightly higher.
In the UK market, Persimmon and British Land Company both finished down around 4.6%. Entain, St. James’s Place, ICP, TUI, Land Securities and Auto Trader Group finished down 3-4%.
Rightmove, CRH, Pennon, Berkeley Holdings, Segro, Carnival, Barratt Developments, Prudential, Just Eat Takeaway.com, Easyjet, Antofagasta, Natwest, AstraZeneca and IAG fell between 1.7% and 3%.
Mondi rose 3.25%. Royal Mail and Hikma Pharmaceuticals gained around 2% and 1.8% respectively. Reckitt Benckiser and BT also finished significantly higher.
In the German market, MTU Aero Engines, Sartorius, Infineon, Porsche, Merck, Adidas, HeidelbergCement, Siemens Energy, Zalando, Vonovia, Volkswagen, BASF, Deutsche Bank, Siemens Healthineers and Bayer finished down 1.3 to 3, 6%.
In Paris, Societe Generale plunged more than 12% after its chief executive Slawomir Krupa lowered his profitability targets and forecast a slowdown in growth, unveiling what he called a “realistic” new plan. The bank said it would target a return on tangible equity of between 9% and 10% by 2026, up from a previous target of a return of 10% by 2025.
Teleperformance ended down 3.3%. WorldLine, LVMH, ArcelorMittal, Capgemini, Crédit Agricole, Air Liquide, BNP Paribas, Kering, Publicis Groupe and STMicroElectronics lost 2 to 2.6%.
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