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Powell: Need to raise rates and possibly go faster
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ECB survey shows rising wage growth expectations
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GEA Group among top gainers on 2022 earnings beat
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HelloFresh slumps on 2023 profit forecast miss
(Adds details, comments; updates prices to close)
By Ankika Biswas and Shreyashi Sanyal
March 7 (Reuters) - European shares logged their
steepest one-day fall in two weeks on Tuesday as investors
assessed the prospects of a 50-basis point rate hike by the U.S.
Federal Reserve following hawkish remarks by Chair Jerome
Powell.
The pan-European STOXX 600 index closed 0.8% lower,
with real-estate and technology stocks taking a
sharp hit.
The Fed may need to raise rates more than expected and is
prepared to move in larger steps if incoming information
requires tougher measures to control inflation, Powell said in
prepared remarks for a hearing before the Senate Banking
Committee.
This comes ahead of monetary policy meetings by the Fed
and the ECB later this month, with markets preparing for another
round of rate hikes.
"Markets are repricing the interest rate outlook," said
Patrick Armstrong, chief investment officer at Plurimi Wealth.
"Economies globally are proving pretty resilient so far
this year -- while that's good news for growth, it's bad news
for inflationary pressures all the central banks are facing."
A European Central Bank survey showed inflation expectations among euro zone consumers dropped in January, but that for wage growth continued to rise, aggravating fears wage growth will slow efforts to control prices.
Citigroup economists
expect the ECB to hike rates by 50 basis point both in
March and May, pushing its policy rates to about 4% by July. The
central bank has raised rates by 3 percentage points since July
and flagged a 50 basis point hike for March, while also leaving
the door open to subsequent moves.
Nevertheless, European equities have had a decent start to
the year with a 8.4% gain, driven by an improving economic
outlook and better-than-feared earnings, even outperforming
their U.S. peers.
Out of the 238 STOXX 600 companies that have reported
fourth-quarter earnings, 59.2% exceeded estimates, according to
Refinitiv data. In a typical quarter 53% beat estimates.
Among other major movers, China-exposed luxury giant LVMH fell 1.1% following China's weak trade data.
Lower metals prices dragged the basic resources index to the bottom of European sector indexes following the data from top metals consumer China data and Powell's comments. Germany's Henkel slipped 2.7% on expectations that slower industrial and consumer demand will curtail sales growth this year. HelloFresh slumped 10.2%, to the bottom of the STOXX 600, on lower-than-expected 2023 profit forecast. Norwegian hydrogen company Nel dropped 8.3% after completing a private placement at an about 9% discount. German food-processing equipment maker GEA Group was among the top STOXX 600 performers with 3.7% gains following better-than-expected 2022 earnings. Bank of Ireland rose 2.4% on plans to boost shareholder returns, helping the country's ISEQ index rise 0.2%. (Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru; Editing by Subhranshu Sahu, Devika Syamnath and Keith Weir)
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