European trading subdued as investors await interest rate moves

European shares were subdued on Wednesday after hitting near one-week highs in the previous session as investors treaded cautiously ahead of the US Federal Reserve’s interest rate decision.

Concerns about the future trajectory of rate hikes kept optimism in check as investors worried about the prospects of the US economy being tipped into a recession from sharp interest rate hikes.

Both the Bank of England and the European Central Bank will announce interest rate decisions on Thursday.

Dublin

The Iseq finished flat in line with the moribund mood across European markets. Ryanair fell for the third consecutive session, declining 1.4 per cent to €12.85, while Paddy Power-owner Flutter Entertainment slipped 0.7 per cent to €139.70.

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Insulation maker Kingspan also went into reverse, dropping 1.5 per cent to €53.50, while Bank of Ireland was down 1.1 per cent at €7.82.

But AIB added 1.3 per cent to €3.21, building materials giant CRH rose almost 0.7 per cent to €38.06 and food group Kerry gained 1.65 per cent to €87.36.

London

The UK’s main stock indexes closed lower as investors took little relief from softer-than-expected UK inflation. The export-oriented FTSE 100 slipped 0.1 per cent, while the domestically-focused FTSE 250 shed 0.3 per cent.

Sterling benefited from weakness in the dollar and positivity surrounding a sharper-than-expected slowdown in inflation, which dipped from 11.1 per cent to 10.7 per cent in November.

UK housebuilders fell 1.2 per cent as JPMorgan analysts published a cautious note on the sector, downgrading several stocks, citing a “seasonal lull” for the next few months.

Among single stocks TUI fell 8 per cent after the world’s largest holiday company said it planned to repay Covid support through a capital raise next year.

BT Group was a bright spot, up 2.1 per cent, after the telecoms and network provider submitted its new Equinox 2 wholesale fibre offer to the British communications regulator Ofcom.

Europe

The region-wide STOXX 600 closed flat. The index had rallied more than 1 per cent on Tuesday after softer-than-expected US inflation data raised hopes of the Fed shifting to smaller rate hikes.

Euro zone borrowing costs rose amid hawkish remarks from European Central Bank sources, while investors were cashing in on a bond rally the day before fuelled by US inflation data. Rate-sensitive technology stocks declined 0.9 per cent, while banks fell 0.5 per cent.

Defensive stocks such as Nestle and Unilever added 1 per cent each, capping losses on STOXX 600. Travel and leisure stocks fell 1.4 per cent, dragged lower by London-listed shares of TUI, which fell 8 per cent after the world’s largest holiday firm said it planned to repay Covid-19 support through a capital raise next year.

Meanwhile, Zara owner Inditex rose 3.1 per cent after the world’s biggest fashion retailer posted a 24 per cent increase in net profit for the first nine months of its fiscal year.

US

Wall Street stocks inched up in early trading, while government bonds and the dollar were muted ahead of the US Federal Reserve’s meeting later in the day and central bank decisions in Europe and Britain on Thursday.

The subdued price moves followed a rally in stocks and a sharp drop in the US dollar in the previous session when consumer prices data showed a slowdown in inflation. That lifted hopes that central banks will stop raising interest rates in early 2023.

Mega-cap growth stocks like Microsoft, Apple, Mastercard and Qualcomm gained between 0.9 per cent and 1.1 per cent in the morning, while Tesla slipped 2 per cent after a Goldman Sachs analyst trimmed the price target for the electric-vehicle maker’s stock.

Delta Air Lines advanced 2 per cent as the Atlanta-based carrier is expecting to nearly double its profit next year.

Additional reporting: Reuters