European stock markets experienced a significant dip as mining and real estate stocks took a hit, amidst persisting concerns among investors about the possibility of higher interest rates in the near future. The STOXX 600 index suffered a 0.5% decline, following a positive close in the previous session when the Federal Reserve Chairman, Jerome Powell, stated that the US central bank had not yet determined the extent of the expected rate hike this month.
However, investors remain apprehensive about the possibility of prolonged rate hikes, as recent stronger-than-anticipated US economic data coupled with a series of indications have suggested that the Federal Reserve may need to keep raising rates in order to keep inflation in check.
The European Central Bank is set to be in the spotlight in the coming week, as the bank is expected to raise its key rate by 50 basis points, with many of its officials calling for further rate hikes in subsequent meetings.
The real estate sector experienced a significant decline of 2%, with Leg Immobilien being hit the hardest with a decline of over 10%, after the German company suspended its dividend. The mining sector also suffered, losing 1.8% as copper prices fell, with the dollar hovering near a three-month high.
Hugo Boss, the German fashion house, saw a decline of more than 2% after announcing that it expects slower sales growth in 2023 compared to the previous year.
Meanwhile, Credit Suisse Group saw a drop of 4% after postponing the release of its annual results due to a last-minute intervention by the US Securities and Exchange Commission (SEC), which raised concerns about the firm’s previous financial statements.
On the other hand, Deutsche Post was able to reverse its earlier losses, gaining 2% after announcing an increase in its 2022 dividend thanks to a record year, while also highlighting the anticipated challenges that lie ahead.
In contrast to some of the sectors mentioned above, Dassault Aviation experienced an increase of over 10% to record highs due to better-than-expected 2022 results.
In conclusion, the current climate is characterized by a degree of uncertainty, particularly with regards to the future trajectory of interest rates. This is reflected in the struggles of certain sectors such as mining and real estate, but there are also some bright spots such as Deutsche Post and Dassault Aviation. Investors will no doubt be keeping a close eye on upcoming events, particularly the actions of central banks and the performance of key economic indicators.