FRANKFURT – European stocks closed notably lower on Monday as investors stayed wary of indulging in any significant buying ahead of monetary policy decisions of the Federal Reserve, the Bank of England (BoE), and the Bank of Japan (BoJ).
The BoE appears set to end its tightening cycle with a final rate hike this week as any further increase will push the UK economy into a deep recession, reported dpa-AFX.
The record high wage growth as well as persistently high inflation strengthened the call for additional policy tightening. However, the past rate hikes have started to dampen economic activity in Britain.
Recent economic indicators suggest that the economy has entered a mild recession.
Markets widely anticipate a quarter-point increase on Thursday, a day after the release of the consumer price inflation data.
In the United States, the Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank’s projections for clues about the outlook for rates.
While CME Group’s FedWatch Tool is currently indicating a 99 per cent chance the Fed will leave rates unchanged this week, the outlook for the November meeting is somewhat more mixed. The FedWatch Tool is indicating a 68.4 per cent chance rates will remain unchanged in November but a 31.3 per cent chance of another quarter-point rate hike.
Meanwhile, the German economy is set to contract slightly in the third quarter as private consumption is unlikely to contribute positively, Bundesbank said in its monthly report released Monday.
The pan European Stoxx 600 dropped 1.13 per cent. The UK’s FTSE 100 drifted down 0.76 per cent, Germany’s DAX declined 1.05 per cent and France’s CAC 40 ended 1.39 per cent down, and Switzerland’s SMI closed lower by 0.96 per cent.
Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Netherlands, Poland, Portugal, Russia, Spain, Sweden, and Turkey closed with sharp to moderate losses.
Iceland and Norway edged down marginally, while Ireland closed slightly higher.- Bernama
