Fed bounce fizzles as recession fears roil markets

The market rebound that followed a pair of big announcements — by the European Central Bank and the US Federal Reserve on Wednesday — proved short-lived as European equities tipped back into the red.

A surprise rate hike by the Swiss central bank coupled with broader concerns about surging global inflation weighed heavily on sentiment as investors weigh the potential for more hawkish central bank action. The Bank of England also lifted rates on Thursday, its fifth consecutive hike since December.

DUBLIN

Faring slightly better than many other European indices during a broad-based market sell-off, the Iseq tumbled more than 2 per cent in Thursday’s session.

During a bad session for airlines across the board, Ryanair was down close to 4.5 per cent to trade at €11.40 at the closing bell. Traders say negative headlines about planned industrial action by Ryanair cabin crew in Portugal, Spain and Italy later this month may also be weighing on the carrier’s share price.

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Stocks exposed to the broader economy, particularly in construction and building materials, continued to falter in Thursday’s session. Homebuilder Glenveagh fell 4.4 per cent to €0.89 per share, while Cairn Homes was 4.3 per cent weaker, trading at just above €0.97 per share.

After a comparatively strong start to the week, Irish bank stocks also declined after the Central Bank announced plans to increase the amount of rainy-day capital lenders are required to hold. AIB fell almost 2.9 per cent to finish the session at €2.35, while Permanent TSB fell more than 2 per cent and Bank of Ireland slipped more than 1.4 per cent.

LONDON

London’s blue-chip FTSE 100 index fell more than 3 per cent in the session after a brief bounce on Wednesday ended six straight sessions of losses. The Bank of England’s decision to hike its base rate by a further 0.25 percentage points sent shivers through UK markets.

Consumer discretionary stocks took a pummeling. JD Sports, down 9 per cent at one point on Thursday, finished the session off nearly 8.5 per cent. Asos plunged more than 30 per cent to its lowest level since 2010 after significantly downgrading its profit and sales guidance. Boohoo was down more than 11.7 per cent after recording the first UK sales decline in its history.

Aer Lingus-owner IAG fell more than 7 per cent and EasyJet tumbled more than 3 per cent.

EUROPE

The pan-European Stoxx 600 index fell 2.5 per cent by closing bell to its lowest level since February last year, with retail, chemicals and technology sectors leading the declines. German online fashion retailer Zalando, down 12.4 per cent in the session, led the charge. German energy giant Uniper was down 9.7 per cent after announcing it had received 25 per cent less gas than contracted from Russia.

The French CAC 40 closed in a bear market, falling 20 per cent from its January peak.

Swiss shares retreated to the lowest since December 2020 after the country’s National Bank unexpectedly raised interest rates for the first time since 2007.

NEW YORK

The rally that followed the Fed’s decision fizzled out, with the S&P 500 on course for its lowest level since December 2020. The tech-heavy Nasdaq 100 underperformed. Homebuilders slid as investor woes deepened, with mortgage rates jumping the most since 1987 and housing starts dropping.

Treasury 10-year yields pared their rally after surging as much as 21 basis points to 3.49 per cent. The dollar fell. Bitcoin, which earlier added as much as 6.1 per cent, headed toward its longest losing streak in Bloomberg data going back to 2010.

Declaring that it is essential to tame inflation, Jerome Powell held out the distinct possibility of another jumbo hike in interest rates in July on Wednesday. While the Fed chief sought to soften the blow of the 75-basis-point boost by saying he didn’t expect moves of that size to become the norm, he all but admitted the chance of an economic downturn. — Additional reporting by Bloomberg, Reuters