European Stocks Decline

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European Stocks Decline

European Stocks Decline On Hawkish Federal Reserve

The US Federal Reserve has once again reiterated a hawkish stance and has raised concerns about the risks associated with monetary policy easing.

In Germany, the DAX index is trading with -0.3% change, while France's CAC 40 is down by -0.2%. Similarly, the FTSE 100 from the UK is down by -0.2% due to the hawkish comments from the US Fed.

At Wednesday's meeting of the US Fed, the rates were not changed as expected by the economists. However, the US Federal Reserve adopted a hawkish stance by commenting on how fewer rate cuts may only be needed this year. The reason for this change of stance is inflation, which is expected to increase.

Us Interest Rate To Reach 5.1% By Year End

According to the Fed members, the interest rate by the year end will be around 5.1%. For now, the interest rate in the USA is between 5.25% - 5.5% which means we only get one rate cut this year. Back in the March 2024, the US Federal Reserve was expected to go ahead with 3 rate cuts.

At the same time, around 4 members of the FOMC committe even talked about no rate cuts in 2024 as well. So as far as the US Fed is concerned, the talks are now about fewer rate cuts and even no rate cuts this year.

Last Thursday, the ECB lowered its policy rate but didn't offered any hopes for any future policy easing measures. So, there is a certain degree of uncertanity on the next move from the ECB.

That's why investors will now try to find clues from the economic data in order to get an idea of any change in the monetary policy.

The recent US inflation will likely help the EU equity market limit losses, but the Spanish CPI showed a jump of 3.6% y/y against the last reading of 3.3%.

Over all, the EU stocks are trading with a negative bias as one of the largest economies is expected to roll out fewer rate cuts than initially expected.

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