European stocks bounce off lowest in more than a year after Powell remarks
(For a Reuters live blog on U.S., UK and European stock markets, click
or type LIVE/ in a news window)
* Wall Street turns positive, helping sentiment
* Oil majors slide as crude dives
* Defensives gain, capping losses
* ArcelorMittal, other steel makers fall on JPM downgrade (Updates to close)
By Sruthi Shankar and Susan Mathew
June 22 (Reuters) - European stocks bounced off session lows on Wednesday after Federal Reserve Chair Jerome Powell said the U.S. central bank is "strongly committed" to bringing down inflation.
Wall Street erased losses to turn positive after the remarks at a hearing before the U.S. Senate Banking Committee, while the pan-European STOXX 600 .STOXX closed down 0.7%, after having fallen 1.8% to its lowest since January 2021.
Analysts said markets took heart from the lack of surprises in the comments.
"We are seeing a reaction akin to something along the lines of a medicine that tastes bad is normally the one that makes you better soonest," said Stuart Cole, senior macro strategist at Equiti Capital.
"Runaway inflation is just as damaging for stock valuations as a possible recession. The negative growth story Powell's comments imply are being tempered by a sense of relief that the authorities are taking the inflation threat seriously."
Equity markets took a beating last week as recession fears heightened after the Fed raised its key interest rate by three-quarters of a percentage point, and signalled more. The Bank Of England also raised rates and the European Central Bank is due to start its hiking cycle next month.
Data on Wednesday showed soaring food prices pushed British consumer price inflation to a new 40-year high of 9.1% last month, underlining the severity of the cost-of-living crunch. UK's blue-chip FTSE 100 .FTSE dropped 0.9%.
Weighing the most were material stocks .SXPP as iron ore and copper prices slumped on china supply and growth worries. Oil and gas stocks .SXEP slipped 3.3% as crude prices dropped on U.S. President Joe Biden's plan to cut fuel costs for drivers.
Gains in defensive sectors such as real estate .SX86P , food and beverages .SX3P and healthcare .SXDP capped losses.
A combination of surging inflation, tighter monetary policies, the Ukraine war and a slowdown in China's economy has pushed the wider STOXX 600 down about 18% from its all-time closing high hit in January.
Germany's DAX .GDAXI dropped 1.1% as BASF BASFn.DE slid 5.8% after the German chemical group's CEO said the company is likely to face a considerable downturn early in the second half of the year.
European steel companies such as ArcelorMittal MT.AS , Voestalpine VOES.VI and Salzgitter SZGG.DE fell in the range of 13.1% and 11.1% after JPMorgan downgraded the stocks, saying steel prices are yet to bottom.
Norway's Mowi MOWI.OL tumbled 7.3% after Groupe Bruxelles Lambert (GBL) sold a 3.5% stake in the world's largest fish farmer.
Reporting by Sruthi Shankar in Bengaluru; Editing by Shailesh Kuber, Uttaresh.V and David Gregorio
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.