Friday saw European markets close a bit higher, which brought an end to a week that has been quite volatile for global stocks, primarily because of the monetary tightening policies announced by central banks.
European Stocks Up for the Week
There was a 0.1% rise in the STOXX 600 index, as gains were led by the tech sector that rose by 1.4%. Most of the other sectors were also in positive territory, with gas and oil stocks being the only negative as they shed almost 4% of their values.
As far as individual stocks are concerned, there was a 5.6% surge in the value of ABN Amro stocks. This rise occurred after a report from Bloomberg that BNP Paribas of France was considering the acquisition of the Dutch bank. There was also a more than 10% rise in the Nokian Tyres of Finland, after it hiked up its net sale guidance for the year.
The blue-chip European index had ended Thursday’s trading session with a fall of 2.5% because of a global sell-off in stocks. This was because fears of a recession were brought forward by the aggressive hiking of interest rates by several global central banks for bringing inflation under control. Shares across the entire continent declined for the week by more than 4%.
Central Banks’ Policies
On Wednesday, the US Federal Reserve gave its benchmark interest rate a boost by 75 basis points, which was the largest rise after 1994. Then, the Swiss National Bank took the markets by surprise when it announced that it was also hiking its interest rates by 50 basis points for the first time since 2007. Likewise, the fifth consecutive interest rate hike from the Bank of England of 25 basis points was also announced.
An emergency meeting was also conducted by the European Central Bank, after which it said that they would address the risk of fragmentation in the euro zone with a tool. This was meant to ease fears of a debt crises for the bloc. Klass Knot, a policymaker for the ECB, said on Friday that the bank could hike their interest rates by 50 basis points several times if inflation gets worse in the euro zone.
Euro Zone Inflation Rises
The data for inflation in the euro zone had also been due on Friday and it showed that it had indeed recorded a high of 8.1% in May. Market analysts said that with central banks planning on being more aggressive, it would bean that both economic growth and equities are going to take a beating.
Obviously this means that the recession risks would rise and it would become very challenging to achieve a soft landing. Asia-Pacific trading overnight saw the shares mixed, as Japan was leading losses in the major markets of the region. This is because the Bank of Japan is not planning on joining other central banks in tightening monetary policy and announced that it would continue its bond buying program, even with a falling yen.