European stocks dip at open after Fed warns recession “a possibility”
European stocks fell Thursday morning as markets digested the Federal Reserve’s comments that a recession is “certainly a possibility” and await data on the performance of the European economy.
The regional Stoxx 600 index lost 0.6 percent in morning trading, while the FTSE 100 lost 0.9 percent and the German Dax index lost 0.4 percent.
Fed Chair Jay Powell told US lawmakers on Wednesday that it is becoming increasingly difficult for the central bank to tackle inflation while maintaining a strong labor market.
Despite reassuring markets that the US economy remains strong, Powell’s comments led to a dip in US stocks on Wednesday night, with the S&P 500 losing 0.1 percent for the day. Futures that tracked the S&P 500 on Thursday morning fell 0.15 percent.
Energy stocks were among the hardest hit US companies on Wednesday. The prospect of a recession pushed the price of Brent crude futures, the international benchmark, 1.6 percent lower to $110 a barrel.
In Asia, Hong Kong’s Hang Seng index rose 1.6 percent after Chinese state media reports of expanded tax exemptions for electric vehicle buyers boosted stocks in the sector. The Japanese Topix index remained flat.
Economic data will provide further indications on the health of the European economy on Thursday. Markets await the release of Purchasing Managers’ Indices, which measure business confidence across Europe. The European Central Bank also publishes its monthly economic bulletin.
Overnight, the yield on the 10-year US Treasury bill, which forms the basis for global debt pricing, fell 0.12 percentage points to 3.16 percent. On the stock exchange in Europe, 10-year Bund yields fell 0.04 percentage point to 1.57 percent, according to Tradeweb data. Bond yields move inversely to prices.
In the US, Powell will again appear before lawmakers on Thursday for a second day of testimony.
The latest figures on US inflation showed it had reached 8.6 percent in the world’s largest economy, and Powell said the Fed needed to see “compelling evidence” that inflation was moderating before giving in to its push to lower the rate. to raise interest rates.