European shares were little changed on a quiet day with US markets closed for the President’s Day holiday.
“Earlier gains for European indices have been chipped away this afternoon, as concerns about interest rates and the ongoing Ukraine conflict sapped risk appetite,” said IG chief market analyst Chris Beauchamp.
“The past month has seen a dramatic repricing of expectations around interest rates. Previously, markets had seen cautiously optimistic that the end of the surge to tighten rates was upon us. Stronger data from various quarters has reversed that view entirely.”
The pan-European Stoxx 600 index edged up 0.07% to 464.64, while the Dax drifted lower by 0.03% to 15,477.55 and the FTSE Mib dropped 0.56% to 27,597.01.
Overnight, China’s decision to hold interest rates boosted sentiment.
The People’s Bank of China left its 1-year loan prime rate unchanged for February at 3.65%. It also left its 5-year loan prime rate, a reference for mortgages, unchanged at 4.30%, widely in line with expectations.
The PBOC last week left its medium-term lending facility loans rate unchanged at 2.75% while injecting more liquidity into the banking system as corporate loan demand recovers.
On the geopolitical front, tensions between the US and China were ratcheted up as US Secretary of State Antony Blinken warned top Chinese diplomat Wang Yi of consequences should Beijing provide material support to Russia’s invasion of Ukraine.
Meanwhile, Eurozone construction output fell in December, mainly due to a sharp slump in Germany, according to official data released on Monday.
Construction production declined 2.5% on the month following a revised 0.1% drop in November. The figures showed that Germany suffered the biggest monthly fall in construction output, at 8%, followed by Austria at 7.6% and Poland at 3.8%.
The European Commission on the other hand reported a fifth straight improvement in consumer confidence in the euro area during the month of February.
Its confidence index rose by 1.9 points to -19.0, although it remained well below its long-run average, thus pointing to ongoing declines in consumption.
In equity news shares in Raiffeisen Bank dropped 7% after the Austrian Bank had on Friday revealed it had received a request for information from the United States’ sanctions authority about its business related to Russia.
Telecom Italia shares fell as a government-sponsored offer rivalling KKR’s bid for the former phone monopoly’s grid failed to materialise over the weekend.
Forvia, the European car parts maker that emerged born from Faurecia’s takeover of Hella, forecast stable 2023 sales, sending Faurecia shares higher.
