by On Friday, European markets closed the first day of the second half of the year mixed, after they had gone through the worst quarter has seen since the beginning of the COVID-19 pandemic. Investor sentiment was under pressure due to expectations of interest rate hikes and soaring inflation.
Performance of indexes
The continent-wide STOXX 600 index closed the day flat, even though it had climbed by 1% earlier. Tech stocks were leading losses with a decline of 2%, while a 3% gain was recorded in utilities. In Friday deals, the worst performance came from ASMI, as the Dutch chipmaker fell by 9% which led to a broad decline in stocks of semiconductor companies.
SSB, the real estate company in Sweden, was the biggest gainer for the day, as it recorded a 9% rise after a cash flow statement from 2021 was published. On Thursday, the European blue-chip index had ended the year’s second quarter with a loss of 9%. This is the worst quarter for it since the time of the pandemic and its year-on-year decline is about 16.6%.
Market sentiment
With inflationary pressures continuing their advancement and the war between Russia and Ukraine showing no sign of abating, it is not surprising that global market sentiment is quite grim. Central banks have been driven to tighten their monetary policies rather aggressively and this has worsened fears of a slowdown in the global economy.
There was a rise in inflation in the eurozone, as it touched 8.6% in June. This was primarily because the Russia-Ukraine conflict driving up prices of energy and food.
Overnight shares in Asia-Pacific remained low with losses in the region led by the Nikkei 225 in Japan. This was after a sharp decline was seen in the quarterly business sentiment survey of the Bank of Japan for the April to June period.
However, the manufacturing activity in China rose at the fastest pace in the last 13 months, thanks to resurgent output after the lockdown measures were lifted.
US stocks
As for Wall Street, overnight trading saw stocks fall on Friday and the benchmark S&P 500 index ended the day with its worst performance in the first half of the year in decades. This was because market sentiment was under pressure due to disappointing economic data. Stocks were also under pressure because of several warnings about profits.
The US Federal Reserve is scheduled to meet this month and announce another hike in the interest rates. Initially, expectations had been for a 75 basis points increase, but they have now come down to 50 basis points because data shows that the economy is slowing down.
Meanwhile, in Europe, the European Central Bank is looking to begin taking steps to prevent fragmentation from occurring in the economy. Therefore, it will start buying bonds from some of the countries in southern Europe, such as Greece, Portugal, Spain, and Italy. The proceeds for this activity will come from a maturing debit of French, German and Dutch countries.
