European stocks weaken; caution ahead of central bank meetings

  • Stock Market News
European stocks weaken; caution ahead of central bank meetings
Credit: © Reuters.

By Peter Nurse - European stock markets retreated Monday, with investors cautious ahead of policy-setting meetings from the likes of the Federal Reserve and the European Central Bank this week.

At 04:00 ET (09:00 GMT), the DAX index in Germany traded 0.6% lower, while CAC 40 in France traded down 0.4% and the FTSE 100 in the U.K. dropped 0.3%.

The U.K. market slightly outperformed Monday after data showed that the British economy grew for the first time in four months in October after a September affected by the funeral of Queen Elizabeth II.

Gross domestic product rose 0.5% from September, meaning that the U.K.'s economy has finally recovered to the level it was at immediately before the pandemic erupted, nearly three years ago. 

However, GDP in the three months through October was still down 0.3% from the period through September, a likely start of what the Bank of England warned could be the longest recession in 100 years.

Despite this gloomy prognosis, the BoE is expected to join the U.S. Federal Reserve , the European Central Bank and the Swiss and Norwegian central banks in raising borrowing costs this week.

The Fed starts the ball rolling on Wednesday, and is widely expected to hike by 50 basis points even after U.S. Treasury Secretary Janet Yellen forecast a substantial reduction in U.S. inflation in 2023.

The European central banks are all scheduled to pronounce on Thursday, with the ECB and the Bank of England also seen hiking by 50 basis points despite the deteriorating economic outlook.

In corporate news, the London Stock Exchange (LON: LSEG ) stock rose 4% after the group said tech giant Microsoft (NASDAQ: MSFT ) will take a stake of 4% in the exchange operator as part of a new strategic partnership.

Sanofi (EPA: SASY ) stock rose 1.1% after the French health group dropped its bid for biotech company Horizon Therapeutics (NASDAQ: HZNP ), potentially leaving the way open for Amgen (NASDAQ: AMGN ) to launch a bid.

Roche (SIX: RO ) stock fell 0.5% after the Swiss drugs giant appointed Thomas Schinecker as the new group chief executive, replacing Severin Schwan who has been nominated to be its next chairman.

Crude oil prices fell Monday, handing back earlier gains on the back of the Keystone pipeline between the U.S. and Canada remaining closed, threatening to tighten supply to the largest consumer of crude in the world.

Canada's TC Energy (NYSE: TRP ) has yet to determine the cause of the leak to its Keystone oil pipeline, and consequently it has no timeline as to when it would resume distributing 622,000 barrels a day of heavy Canadian crude to refineries in the U.S. Midwest and the Gulf Coast.

By 04:00 ET, U.S. crude futures traded 0.3% lower at $70.82 a barrel, while the Brent contract fell 0.5% to $75.75. 

Both contracts fell last week to their lowest levels since December 2021 on concerns that a possible global recession will hit oil demand.

Additionally, gold futures fell 0.5% to $1,801.15/oz, while EUR/USD traded 0.2% higher at 1.0547.

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