European equities rebound as ECB holds emergency meet

European equities rebound as ECB holds emergency meet

Web Desk
June 15, 2022

European equities rebound as ECB holds emergency meet

Meeting will discuss eurozone bond markets and increasing inflation.
Bitcoin approaches the key level of $20,000 as investors shun risky crypto assets.
Asian share markets closed mixed as investors braced for a US rate hike.

European equities rose on Wednesday as the European Central Bank convened an emergency meeting to discuss volatile eurozone bond markets and increasing inflation, while investors braced for a major US rate hike.

Stock markets in Frankfurt, London, and Paris gained, and the euro rose against the dollar, as investors were soothed by news of the impromptu ECB meeting, which began at 1000 GMT.

All three main indices had slid Tuesday on growing expectations that the Federal Reserve will move aggressively to combat inflation at the conclusion of its latest scheduled monetary policy meeting on Wednesday.

Read More: European stocks advance at open

Bitcoin extended this week’s precipitous slide to approach the key level of $20,000 as investors continued to shun risky crypto assets, while oil prices retreated further on lower energy demand expectations.

– ‘Smacks of panic’ –

Markets.com analyst Neil Wilson said the ECB meeting “smacks of panic and a lack of control — but the market is happy to see it happen”.

The borrowing costs of some eurozone countries have risen faster than those of others as the ECB tightens its monetary policy. The bank has vowed to prevent such “fragmentation”.

The ECB is not due to raise eurozone interest rates or end its massive bond-buying stimulus programme until July.

However, eurozone countries are already facing higher borrowing costs on government bonds.

Asian stock markets closed mixed Wednesday with investors on edge over a looming Fed decision that has taken on greater significance since forecast-busting US inflation recently sent shockwaves through global markets.

Traders’ screens were awash with red at the start of the week after data on Friday revealed that US consumer prices had soared at the fastest pace in four decades.

That confounded hopes that US inflation was stabilising and intensified pressure on policymakers to act.

The news ramped up bets that the Fed would hike interest rates at a steeper and faster pace than expected as it struggles to retain credibility.

Prior to Friday’s report, the Fed was largely expected to raise borrowing costs by half a point when its policy meeting concludes on Wednesday, but investors are now broadly expecting a three-quarter point hike, with some even predicting a percentage point increase.

The developments fueled fears that tighter monetary conditions will harm the US economy and plunge it into recession next year.

“There is no shortage of pessimism in the market and traders are on the edge as they know that central banks have made the biggest blunder by calling inflation transitory — and their current policy is going to cause a great deal of pain,” AvaTrade analyst Naeem Aslam told AFP.