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Frankfurt - European stocks fell as investors weighed the possibility of the Federal Reserve increasing interest rates sooner than had been expected.
The Stoxx Europe 600 Index slipped 0.2% to 334.11 at 11:25, after closing unchanged yesterday.
The equity benchmark has lost momentum since an April 20 peak as concerns about slowing growth in China and the US, and worries over central-bank policies resurfaced amid mixed earnings reports. The index has gone almost a month without ending at least 1% higher, signaling a lack of triggers to boost shares.
Expectations for the Fed to add to December’s interest-rate increase are starting to build after higher-than-expected U.S. consumer-price data, with comments from Fed presidents Dennis Lockhart and John Williams that at least two interest-rate increases may be warranted this year also stoking speculation of a move.
“The Fed talking up rate-hike expectations is certainly having a negative effect on equity markets because the markets have been pricing in potentially one rate rise this year,” said Michael Hewson, a London-based market analyst at CMC Markets.
“Certainly not one in June and maybe one in December and yet you have Fed officials talking about two or three rate hikes. We just appear to be chopping around at the moment in the absence of any real certainty and that’s likely to be the case at least for the next few weeks.”
Investors are also awaiting minutes from the Fed’s April meeting, which are due after the close of European markets today. Traders have boosted the probability the central bank will increase rates in June to 12%, up from 4% earlier this week. The first month with even odds of higher borrowing costs also moved up to November from December.
Among stocks moving on corporate news, Burberry Group dropped 2.4% after the luxury-goods retailer posted a second straight drop in annual earnings and announced plans to save $144m a year. Sonova tumbled 7.8% after the Swiss hearing-aid maker’s second-half earnings missed estimates.
Kuka jumped 30% after Midea Group offered to raise its stake in the industrial-robot maker to become its largest shareholder, valuing the German company at $5.2bn.
A gauge of mining-related companies posted the biggest decline of the 19 industry groups on the Stoxx 600 as commodity prices retreated.
