European stocks faced a downward trend at the start of the new trading week as investors continued to be cautious about the economic outlook. Monday’s trading session saw the benchmark Stoxx 600 index wrap up with a 1% decrease, exhibiting predominantly negative performance across most sectors. Notably, chemical stocks took the hardest hit, plunging by 2.8%, while banking stocks managed to stay in positive territory, avoiding significant losses marginally. Additionally, construction and material stocks fell 2.5% due to concerns over a potential mortgage crisis in the UK and a dip in house asking prices. Recent figures revealed that the average rate of a two-year fixed-rate deal exceeded 6% for the first time since December.
Market Focus on Upcoming Bank of England and Swiss National Bank Decisions
The Bank of England and the Swiss National Bank should announce their latest interest rate decisions on Thursday, which has further heightened market focus. Meanwhile, Asia-Pacific markets mostly experienced declines, although Japan’s markets continued to hover near 33-year highs.
Investors in Asia are eagerly awaiting China’s loan prime rate decision on Tuesday, following last week’s rate cuts by the world’s second-largest economy. Additionally, US Secretary of State Antony Blinken’s diplomatic mission in Beijing aimed at repairing strained ties between the US and China has drawn attention.
Next Witnesses Stock Surge, While Getinge Faces Decline
British fashion retailer Next witnessed a 5% increase in its stock on Monday after raising its sales and profit guidance for the year. The company attributed the positive performance to recent warm weather and increased wages for consumers, which exceeded expectations.
On the contrary, Swedish medical technology company Getinge faced a significant decline of 15% due to supply chain issues, leading the firm to issue a profit warning.
UK 2-Year Government Bond Yields Reach a 15-Year High
UK 2-year government bond yields surged to a 15-year high, reaching around 4.978% as of London time. This development comes ahead of the Bank of England’s upcoming monetary policy decision, where a 25 basis points interest rate hike is widely anticipated due to persistently high inflation and a robust labor market.
Goldman Sachs analysts, including Sven Jari Stehn, noted that the latest UK data point to mixed growth momentum, tightness in the labor market, and significant underlying inflationary pressures. These factors have contributed to the expectation of a rate increase by the central bank.
