European shares dip and commodity prices ease after rally on Wall Street

European equities opened lower, following their best day since March 2020, as investors waited to see if the European Central Bank would maintain a loose monetary policy to safeguard the bloc’s economies from the war in Ukraine.

The regional Stoxx 600 share index, which gained 4.7 per cent on Wednesday in a strong rally that snapped four days of losses, lost 0.5 per cent in early trades on Thursday. The moves came ahead of the ECB’s monetary policy statement in the afternoon, as well as an EU summit where leaders will debate a unified response to the recessionary risks from energy price shocks driven by sanctions against Russia.

London’s FTSE 100 dipped 0.6 per cent. Germany’s Xetra Dax, which jumped almost 8 per cent on Wednesday, fell 0.8 per cent.

The moves came after rallies on Wall Street overnight and in Asia, as investors pinned their hopes on Opec and US shale drillers increasing supplies to calm surging energy prices. The United Arab Emirates is set to encourage fellow members of the producer group to raise production, while US energy secretary Jennifer Granholm on Wednesday urged domestic oil groups to increase output, saying the nation was on a “war footing.”

“Markets seem to have latched on to a couple of slightly less dismal clues as an excuse to rally hard in the last 24 hours,” said Robert Carnell, head of Asia research at ING.

Some analysts had queried whether Wednesday’s gains would hold, however, against the backdrop of another night of heavy shelling and missile attacks by Russian forces in Ukraine.

“By far the most common question we have received from investors over the past 24 hours is whether the recovery in the markets yesterday is a first step in a more permanent turnround,” said Karl Steiner, chief quantitative strategist at SEB.

“We are less certain that the bottom has been reached,” he added. “The fact that the war would be resolved through negotiations after only a couple of weeks seems unrealistic.”

ECB governing council members, meanwhile, may emerge divided over whether to delay plans to withdraw emergency monetary policy measures implemented during the coronavirus crisis two years ago. Although the Ukraine war is a threat to economic growth, eurozone inflation has already hit a record high last month.

“We expect the ECB to confirm its intention to normalize policy later this year, although the timing and speed of monetary tightening may have to be reasoned down the road,” said Frederik Ducrozet, a strategist at Pictet Wealth Management.

Brent crude, the international oil benchmark, rose 3.9 per cent to $ 115.55 a barrel after dropping 13 per cent in the previous session. Futures tracking TTF, the European wholesale gas contract, were steady at about € 148 per megawatt hour after rising as high as € 335 on Monday.

In Asia, Japan’s Topix rose 4 per cent in its best day since June 2020, while Australia’s S & P / ASX 200 gained more than 1 per cent. China’s benchmark CSI 300 index rose 1.6 per cent while in Hong Kong the Hang Seng index climbed 1.2 per cent.

The gains followed a rally on Wall Street, where the S&P 500 rose benchmark rose 2.6 per cent and the tech-focused Nasdaq Composite jumped 3.6 per cent.

Unhedged – Markets, finance and strong opinion

Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent straight to your inbox every weekday

Source link

Leave a Reply

Your email address will not be published.