Europe midday: Shares down on caution over rate-cut timing

19th Mar 2024 11:47

(Sharecast News) - European shares were in the doldrums on Tuesday as investors digested Japan's decision to finally lift interest rates and cast their eyes to the US as central bankers prepared to start their latest policy meeting for any hint on when borrowing costs might come down.

The pan-European Stoxx 600 index was down 0.15% in early trade at 503.19. Japan finally lifted rates for the first time in 17 years and ended an eight-year policy of holding them in negative territory, while Australia's Reserve Bank held them steady and warned that inflationary risks still remained.

"Aimed at conquering falling prices, ultra-loose monetary policy has been in place since 2016 and the Bank of Japan has been ultra-cautious about shifting stance, even though core inflation has been running at 2% over the year," said Hargreaves Lansdown analyst Susannah Streeter.

"But now that Japan's biggest companies, through a negotiated deal with the largest industrial union, have agreed to raise wages by 5.28%, and consumer price inflation hit 2%, the Bank has finally judged it prudent to make a move."

Meanwhile the US Federal Reserve will start a two-day meeting with a decision on Wednesday. Economists are expected a 'no change' stance with the possibility policy makers will indicate rates could remain higher for longer than expected after recent data came in hotter than forecast.

Oil prices were slightly lower but near six-month highs on the back of geopolitical tensions in the Middle East and supply fears as Ukraine targeted Russian refinery capacity.

In equity news, shares in consumer goods giant Unilever gained as the company said it was spinning off its ice-cream unit and getting rid of more than 7,500 staff globally.

Reporting by Frank Prenesti for Sharecast.com