Europe close: Investors trim positions ahead of pivotal Fed decision

18th Sep 2024 15:48

(Sharecast News) - European stocks pulled back on Wednesday as investors scaled back their positions with just hours to go before the Federal Reserve's policy decision, which is set to see the US central bank cut interest rates for the first time in four and a half years.

The pan-European Stoxx 600 index ended the day down 0.5% at 514.66, after having risen in five of the past seven trading sessions, with indices across the continent all trading in the red.

Danni Hewson, AJ Bell's head of financial analysis, said the optimism surrounding the rate cut over recent days has been replaced by "nervousness" ahead of the decision. The past week has seen increased bets that the Fed will go ahead with a 50-basis point (bp) reduction in the Fed Funds Rate, while many still expect a more conservative 25bp cut.

"It's not a question of whether there will be a cut but of how deep the first cut will be and with just hours to go expectation is still pretty divided. There will be investors who've made the wrong bet and that's likely to result in a bit of post-action volatility," Hewson said.

Economic data

While the focus was firmly on the Fed, a barrage of economic data this side of the Pond was still worth investors' attention.

Final estimates for inflation in the eurozone confirmed that annual price growth fell to 2.2% in August from 2.6% a month earlier, confirming the flash estimate released two weeks ago.

Seasonally adjusted production across the eurozone construction industry remained stable in July and increased by 0.2% in the EU compared with June, according to flash estimates. However, on an annual basis production fell by 2.2% in the euro area and by 2.4% in the EU.

Over in the UK, consumer price inflation was unchanged at 2.2% in the year to August, in line with expectations and holding above the Bank of England's 2% target. The Bank's policy committee meets on Thursday and is expected to keep rates on hold. However, core CPI - which excludes volatile items such as energy, food, alcohol and tobacco - rose to 3.6% from 3.3% in July. This was a touch above expectations of 3.5%.

Market movers

Shares in air-conditioning equipment maker Beijer Ref were down 7% as private equity group EQT sold a stake in the Swedish company at a 7.2% discount, according to media reports.

Davide Campari shares also dropped 7% in Milan as chief executive Matteo Fantacchiotti resigned, a little over a year after his appointment at the drinks group, due to personal reasons.

Shares in Ubisoft led the risers in Paris as BMO Capital Markets upgraded the French video games maker to 'outperform' from 'market perform'.

Meyer Burger tanked after the Swiss solar panel manufacturer announced plans to axe around a fifth of its workforce and shake up management, including replacing its chief executive.