European stock markets fell yesterday, weighed down by the mining and travel sectors, as traders digested signs a possible US interest rate hike could be on the cards next month.
Trading saw “Fed-centric uncertainty” return to the fore, Sheraz Mian of Zacks Investment Research said a day after the release of US Federal Reserve meeting minutes that lifted the odds of an increase of interest rates next month.
Europe’s main bourses were led lower by Wall Street, which fell after opening despite solid earnings from Wal-Mart Stores.
London’s benchmark FTSE 100 index closed an emphatic 1.8% lower at 6,053.35 points, while Frankfurt’s DAX 30 index slumped 1.5% at 9,795.89 points and the Paris CAC 40 closed 0.9% lower at 4,282.54 points.
In foreign exchange, the euro was down against the dollar, as the US central banks’ minutes suggested a hike next month was a much more serious possibility than the market previously believed.
The Fed has repeatedly stated its intention to continue raising rates this year after December’s first hike in nine years, but until recently investors had discounted the possibility it would go through with this given the panic in the markets at the beginning of 2016 on concerns of soft global growth.
That prospect has already tightened money conditions for borrowers around the world and strengthened the dollar.
The British pound reached a three-month high against the euro yesterday thanks to polls showing the Remain camp in the lead ahead of the June 23 referendum on Britain’s EU membership.
Sterling struck 76.49 pence against the euro at one point, its highest level since early February, with support also from better-than-expected British retail sales data, analysts said.
In corporate news, shares in travel operator Thomas Cook closed just over 19% lower at 72 pence after the British company revealed a drop in summer bookings, in particular to key market Turkey, following recent deadly attacks.
Adding to the unease was news that an EgyptAir flight had vanished from radar screens yesterday en route from Paris to Cairo with 66 people on board.
Egypt’s aviation minister said that while it was too soon to say why the Airbus A320 had vanished, “a terrorist” attack would be a more likely scenario than a technical failure.
Elsewhere, the share price of German chemicals and pharmaceuticals giant Bayer closed down more than 8% at €88.51 after the company said it was in merger talks with US agricultural giant Monsanto.
After Wall Street opened, shares in Monsanto climbed 4.9%, while Dow member Walmart gained 8.5% as earnings for its first quarter easily topped analyst expectations.
A visitor passes a sign inside the main atrium of the London Stock Exchange Group headquarters. London’s benchmark FTSE 100 index closed an emphatic 1.8% lower at 6,053.35 points yesterday.
