European stocks were trading lower on Monday. Investors eagerly await the decisions of the European Central Bank, the Bank of England and the U.S. Federal Reserve on the key interest rate.
The pan-European Stoxx 600 fell by 0.67% to 436.20 points.
French CAC 40 declined by 0.42%, German DAX lost 0.54% and British FTSE 100 lost 0.38%.
Leaders of growth and decline
London Stock Exchange Group quotes soared 4% on news that U.S. tech giant Microsoft will buy up to 4% of the group as part of a deal to enmesh Microsoft's services into the exchange's operations.
Quotes of the British commercial bank Metro Bank fell by 0.9%. The Financial Conduct Authority (FCA) fined Metro Bank $12.2 million for breaching rules by publishing false information for investors.
The share price of the Danish transport and logistics company A.P. Moller-Maersk AS fell by 2.1%. It announced that Vincent Clerc, currently CEO of the company's Ocean & Logistics business, will succeed as CEO of Maersk effective January 1st, 2023.
Danish biotech company Novozymes AS fell by 9%.
Market sentiment
On Monday, European investors were anxiously anticipating the upcoming December meetings of the European Central Bank, the U.S. Federal Reserve and the Bank of England on monetary policy.
On Tuesday, the Reserve Bank of Australia raised its official cash rate to 3.1%, a 10-year high. In addition, representatives of the central bank reiterated forecasts of the need for further rate hikes in order to curb record levels of inflation.
The meetings of the ECB and the BoE will take place in the middle of the week. Markets forecast that both central banks will raise the interest rate on the backdrop of the permanent growth in inflation. Thus, earlier in his interview to the Italian newspaper Milano Finanza, ECB Chief Economist Philip Lane said consumer-price growth is probably near its zenith.
The ECB raised all three key ECB interest rates by 75 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00%, 2.25% and 1.50% respectively. Most analysts expect the ECB to increase the lending rate to at least 2% from 1.5% at its December meeting.
In addition, the Fed will announce its monetary policy decision on December 14.
Recall that last Wednesday Fed Chairman Jerome Powell spoke at the Brooking Institute Hutchins Center on fiscal and monetary policy.
In his statement, the head of the central bank signaled a potential easing of monetary policy and a slowdown in future interest rate hikes on the back of more favorable data on inflation in America.
The minutes of the Fed's November meeting were released last Friday. According to the document, the majority of the Fed leaders considered it reasonable and appropriate to slow down the central bank's interest rate hike in the near future.
According to the world's leading derivatives marketplace CME Group, to date, 71.1% of analysts expect to raise the interest rate at the December meeting by 50 points - to 4.25-4.5% per annum.
Recall that the central bank raised interest rates by 75 basis points in October for the fourth consecutive meeting. The rate is currently at its highest level since January 2008, at 3.75-4.00% per annum.
Next Friday, Eurostat will publish its final estimate of annual inflation in the euro area at the end of last month. According to experts' preliminary forecasts, consumer price growth fell to 10% in November from October's 10.6%.
As for news from the United States, the country's Producer Price Index for last month will be released next week. According to preliminary forecasts of analysts, growth of the index in annual terms will fall to 5.9% in November from October's 6.7%.
In addition, the U.S. Department of Labor's report on the Consumer Price Index (CPI) will be released on Tuesday, which may affect the Fed's next steps in monetary policy. Experts expect the country's inflation rate to rise 7.3% y/y in November after October's 7.7% increase.
On Monday, European investors will also analyze new data for the countries of the region. According to the UK Office for National Statistics, the volume of industrial production in the country fell in October by 2.4% y/y after a 3.1% decline in September. In this case, the October fall was the lowest since June this year. Analysts on average forecasted a decrease in industrial production by 2.8%.
Meanwhile, in monthly terms, the index increased by 0.7% in October, and its increase was marked for the first time since May 2022. The key reason for such a spectacular rise was the growth of food and beverage production by 0.2%, refined petroleum products by 1.3%, pharmaceutical products by 8.4%, rubber and plastic products by 0.7%, and transport equipment by 2.3%.
Trading results the day before
On Friday, the leading stock exchange indicators of Western Europe closed higher.
The Stoxx Europe 600 rose by 0.84% to 439.13 points.
French CAC 40 gained 0.46%, German DAX gained 0.74% and British FTSE 100 gained 0.06%. Herewith, on the basis of the results of the previous week the British index decreased by 1.05%, the French one lost 0.96% and the German one dropped by 1.09%. The key reason for the pessimism on the European markets was investor fears about the prospects for the global economy.
The share price of Associated British Foods, a British multinational food processing and retailer, fell 0.9%. According to the retailer's updated annual forecast, the company's revenues will increase significantly in fiscal 2022, however, it projects a decline in adjusted operating profit and adjusted earnings from fiscal 2021.
British oil and gas company British Petroleum's stock shed 0.4%.
The share price of the British-Dutch energy giant Shell fell by 1%.
The share price of Australian-British metal and mining corporation Rio Tinto rose by 1%.
British Berkeley Group Holdings rose 0.3% despite the decline in pre-tax profit and revenues in the first fiscal half of the year.
Man Group Plc, a London-based investment company, soared 5.3% as it announced a new share buyback program of up to $125 million.
The share price of German medical equipment manufacturer Carl Zeiss Meditec plummeted 6.9%.
Swiss bank Credit Suisse Group AG soared by 6.8%.
The share price of the German energy company Uniper SE fell by 8.2%.
