Stock markets across Europe dropped sharply Thursday, keying off a reversal of gains for Wall Street in the prior session. The U.S. stock losses came after minutes from the Federal Reserve’s meeting last month suggested more interest-rate hikes are in the pipeline.
A downbeat reading on German business sentiment added to the sour investing mood across the continent,as traders waited for the release of minutes from the European Central Bank’s meeting in January.
How markets are moving
Germany’s DAX 30 index DAX, -0.82% slumped 1.1% to 12,335.18 after that downbeat data, while the broader Stoxx Europe 600 index SXXP, -0.67% fell 1% to 377.44.
France’s CAC 40 PX1, -0.39% lost 0.6% to 5,266.83, and the U.K.’s FTSE 100 UKX, -0.91% slid 1.1% to 7,202.18.
The euro EURUSD, +0.0326% bought $1.2288, little changed from $1.2286 late Wednesday in New York.
The yield on the 10-year German bond TMBMKDE-10Y, -1.59% fell 1 basis points to 0.70%, according to Tradeweb. Yields fall when prices rise.
What’s driving markets
European equities SXXP, -0.67% followed U.S. stock futures ESH8, +0.06% YMH8, -0.14% lower early Thursday. U.S. stocks retreated from a rally Wednesday after minutes of the Fed’s January meeting showed officials see an “increased likelihood” of further interest rate hikes, heightening prospects for a rate rise in March. Policy makers now see the U.S. economy as getting stronger than it was at the end of 2017.
That news helped push the U.S. 10-year Treasury note yield TMUBMUSD10Y, -0.75% up closer to the 3% mark, and buoyed the U.S. dollar DXY, -0.08% . In turn, the stronger greenback pulled down prices of dollar-denominated commodities such as copper HGK8, -0.99% , gold GCJ8, -0.47% and oil CLJ8, -0.62% , which then drove a drop for shares of producers of metals and oil.
Economic data
The minutes for the European Central Bank’s meeting in January are scheduled for release at 12:30 p.m. London time, or 7:30 a.m. Eastern Time.
The Ifo survey out earlier in the session showed German businesses were less enthusiastic about current conditions, although that particular indicator still notched its second-highest level since 1991. The business climate index fell to 115.4 points in February, below the 117.0 points expected from a FactSet consensus poll of analysts.
The U.K.’s Office for National Statistics revised its estimate of U.K. GDP growth in the fourth quarter down to 1.4%, from 1.5%, year on year. The shutdown of a major oilfield for repairs in December hit oil-and-gas production harder than first believed, the ONS said.
What strategists are saying
“Despite some [Fed] members advising patience, most analysts forecast a possible shift from three to four rate hikes in 2018. [A] March rate hike became imminent after the release of the minutes,” said IronFX senior research analyst Peter Iosif in a note.
“The December minutes indicated that the ECB could relook at its forward guidance in early 2018 which encouraged market participants to believe a rate rise could be on the cards sooner rather than later. Today, investors will be watching closely to see if the ECB policy makers have focused more closely on this potential policy shift,” wrote City Index’s senior market analyst Fiona Cincotta.
Stock movers
Barclays shares BARC, +4.87% surged 5.2% after the bank said it would more than double its dividend next year even as the bank swung to a full-year loss of £1.9 billion ($2.64 billion).
Topping the Stoxx 600, Genmab A/S shares GEN, +14.62% soared 14% as the Danish biotech firm posted a 30% rise in 2017 revenue, mainly driven by higher royalties of its Darzalex blood cancer drug.
Anglo American PLC shares AAL, -2.63% dropped 3.9% after the miner posted 2017 net profit of $3.17 billion, missing the $3.25 billion consensus estimate from FactSet.
British American Tobacco PLC BATS, -4.49% fell 4.7%. The maker of Lucky Strike and Dunhill cigarettes said its pretax profit increased more than fourfold in 2017, on gains related to the acquisition of Reynolds American Inc. and credits related to U.S. tax reform. Volume of sales of cigarette and tobacco-heated products fell 2.6%.
Moneysupermarket.com Group PLC shares MONY, -17.70% tumbled 18%, leading losses on the Stoxx 600, after the price-comparison company warned that while pretax profit for 2017 rose on higher revenue that it expects to grow more slowly in 2018 than anticipated.