NEW YORK, May 1 — Eurozone equities sagged yesterday, weighed down by the strong euro as investors digested bright economic news, while Wall Street stocks slumped on disappointing data.
Frankfurt and Paris stocks retreated but the euro jumped against the dollar, as figures showed the eurozone economy emerged from recession in the first quarter with inflation under control. The euro later gave up its gains and turned lower.
London meanwhile zoomed to yet another record peak at 8,199.95 points, with HSBC soaring more than four per cent on a bumper stock buyback despite sliding first-quarter profits and the exit of its chief executive.
But the FTSE 100 index couldn’t hold its gains and closed lower.
Eurozone gross domestic product grew by a stronger-than-expected 0.3 per cent in the first three months of 2024 compared to the prior quarter, having slid into a shallow recession in the second half of last year, official data showed. Annual inflation held at 2.4 per cent in April from the previous month.
The figures are unlikely to stop the European Central Bank from cutting interest rates in June, according to economists.
Meanwhile, the US Federal Reserve is predicted to stand pat on rates after a two-day meeting ends today, but its statement and boss Jerome Powell’s comments will be analysed for clues about the outlook.
Euro weighs
“While the ECB is still expected to cut rates in June, what happens after that remains unclear,” City Index analyst Fiona Cincotta told AFP.
Stronger growth and sticky inflation could mean the ECB keeps rates high for longer, which is lifting the euro, she said.
“However, higher borrowing costs for longer are unfavourable for companies, restricting growth, which is why eurozone bourses are heading lower,” Cincotta added.
Wall Street stocks tumbled yesterday after US consumer confidence fell to its lowest level since July 2022, according to The Conference Board.
US consumers, the motor of the world’s largest economy, appear less optimistic about the jobs market and more worried about future financial conditions.
The Dow shed 1.5 per cent while the broad-based S&P 500 dropped 1.6 per cent.
These moves come before the Fed’s rate decision, with traders lowering their expectations since early 2024 for how many rate cuts the bank will make.
Inflation continues to hold above target, and various indicators show a resilient economy and labour market, making it likely the Fed keeps rates higher for longer.
Asian markets mostly rose. Tokyo stocks piled on more than one per cent as it played catch-up with Asia’s gains on Monday, which was a holiday in Japan.
The yen weakened slightly but held much of the previous day’s surge that observers speculate came on the back of an intervention by authorities after it hit a fresh 34-year low of 160.17 yen per dollar.
Traders are on guard for further yen volatility after the Bank of Japan decided against shifting further from its ultra-loose monetary policy last week and gave little idea about when it would.
