Banks drag European shares down as c.banks join Fed in raising rates

Reuters

Banks drag European shares down as c.banks join Fed in raising rates

2023 3월 23 일, 오전 8:18 GMT

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Banks down 2.4%, rate-sensitive tech up 2.2%

Swiss, Norwegian central banks hike rates as expected

BoE raises rates again, sees inflation shock fading

Sanofi up on 'blow-out' smoker's lung drug data

STOXX 600 slips 0.2%

Updates details, prices; adds comment

By Sruthi Shankar and Bansari Mayur Kamdar

March 23 (Reuters) -European equities inched down on Thursday with banksleading declines after the Bank of England followed the U.S. Federal Reserve and the Swiss National Bank in hiking rates amid worries of a banking contagion.

The continent-wide STOXX 600 index .STOXX slipped 0.2% after closing at its highest level in more than a week on Wednesday.

U.S. stock indexes rallied following a turbulent session on Wall Street where the Fed lifted its interest rate by a widely expected 25 basis points and signalled that they are unlikely to climb much higher.

"The market is still pricing more than two rate cuts by year-end. We doubt this pricing can really stand against sticky inflation, growth in the US, but also in Europe and China actually reaccelerating," said Max Kettner, chief multi-asset strategist at HSBC Global Research.

The Swiss National Bank raised its benchmark interest rate by 50 basis and Norway's central bank hiked by 25 basis points, both in line with market expectations.

The Bank of England, meanwhile, raised interest rates by a further quarter of a percentage point and said it expected the surge in British inflation to cool faster than before.

UK's exporter-heavy FTSE 100 index .FTSE slid 0.9% as pound rallied against the dollar after the BoE decision.

Further weighing on the mood, U.S. Treasury Secretary Janet Yellen told lawmakers that she had not considered or discussed "blanket insurance" to banking deposits after the failure of two U.S. mid-sized lenders earlier this month.

European banks .SX7P fell 2.4% after a tentative rebound earlier this week when UBS Group UBSG.S agreed to buy embattled Swiss lender Credit Suisse CSGN.S in a $3 billion rescue deal.

The index is down about 15% so far in March and set for its worst monthly showing in three years when the onset of COVID-19 pandemic fuelled a sharp global selloff.

Citigroup downgraded the sector, warning the rapid pace of interest rate hikes would further weigh on economic activity and lenders' profits.

"We've got a market that's been chopping around a fair bit," said Gerry Fowler, head of European equity strategy at UBS.

"There are definitely investors who have lingering concerns that rate hikes that are supporting the profit recovery for banks may be curtailed by the tightening in financial conditions, that their profitability is going to be a little more impaired because they have to pay higher deposit rates to maintain their deposit bases."

Among single stocks, Sanofi SASY.PA rose 5.5% after the French drugmaker said its asthma and eczema drug Dupixent, jointly developed with Regeneron REGN.O, met all targets in a trial to treat "smoker's lung".

Dutch tech investor Prosus PRX.AS climbed 6.4% after Chinese video-game company Tencent 0700.HK said it would restrict its focus to its core business, while maintaining cost-cutting and improving efficiencies.

The broader technology index .SX8P gained 2.2%, limiting losses on the broader index.

Sweden-based bank Svenska Handelsbanken AB SHBa.ST fell 11.1% on trading ex-dividend.

Turmoil in European Bankshttps://tmsnrt.rs/3lz9hCX

Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; Editing by Subhranshu Sahu, Vinay Dwivedi and Angus MacSwan

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