Europe’s Investors Hedging – Interest Rate Concerns Remain

FRANKFURT, Jan 10 (Reuters) – After the stock market surge at the start of the year, investors in Europe have again ducked for cover. The leading German index, Dax, closed 0.1 percent lower on Tuesday at 14,774.60 points.

Its European counterpart, the EuroStoxx50, fell 0.3 percent to 4,056.67 points. The main US indices were also slightly in the red. A speech by US Federal Reserve Chairman Jerome Powell failed to ease Wall Street investors’ worries about interest rates. Statements from two American central banks had previously created uncertainty. The Fed is likely to raise interest rates above 5% and keep them there for some time. Also from the point of view of Bundesbank President Joachim Nagel, the high level of inflation is far from over.

“Also due to the inflation data from the US coming on Thursday, investors should initially show a wait-and-see attitude,” says analyst Konstantin Oldenburger of online brokerage CMC Markets. The stock market has gone through the same pattern over and over in recent weeks. Investors clung to data that pointed to a slowdown in the economy or inflation, only to be caught off guard by hawkish comments from the Fed. “It is a game of cat and mouse, where the market does not believe 100 percent in the monetary policy, but also does not want to go completely against it.”


Interest rate concerns boosted the dollar, which is considered a safe haven in times of crisis. The dollar index, which reflects the rate against major currencies, rose 0.3 percent to 103.27 points. The euro was barely changed at $1.0734.

At the same time, government bonds flew out of the depositories and interest rates rose. The yield on the 10-year Bund rose to 2.305 percent from 2.214 percent on Monday, while its US counterpart rose to 3.636 percent from 3.517 percent. It added technology stocks. The European industrial index lost 0.5 per cent. Rising inflation and higher interest rates will devalue future profits from these high-growth companies.


In terms of individual shares, Bayer was one of the favorites with a price increase of four percent to EUR 53.96. The pharmaceutical and agricultural group hopes that its new anticoagulant Asundexian will give its pharmaceutical business a boost. Bayer significantly raised its forecast for the highest sales potential of its most promising blockbuster drug candidates – thanks primarily to expected billion-dollar sales at Asundexian. Pharma boss Stefan Oelrich now estimates the top sales potential of his four main growth drivers at more than twelve billion euros. So far, Bayer expected more than five billion euros.

In contrast, shares in Belgian oil tanker group Euronav fell 17.7 percent to 12.46 euros on a canceled merger with rival Frontline. The completion of the $4.2 billion merger, on the other hand, gave investors access to Frontline. The shares rose 21 per cent. Euronav announced that it would investigate the unilateral cancellation of the merger.

In the US, a failed space flight sent shares in the satellite company Virgin Orbit down. The titles fell by just over nine percent. The company said one rocket failed to reach the required trajectory due to a technical anomaly. Chipmaker Broadcom’s shares were under pressure, losing 3.4 percent to $557.54. The news agency Bloomberg had reported that the American technology giant Apple wants to move away from Wi-Fi and Bluetooth chips from Broadcom and Qualcomm in late 2024 or early 2025 and instead use its own parts.

Europe’s investors under cover – interest rate concerns remain

Source: Reuters

Screenshot: Agena Trader January 10, 2023 / Lenz + Partner data feed

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