ROME: European stock exchanges were reeling on Thursday, as investor worries about the European Central Bank’s (ECB’s) aggressive monetary policy sparked a sell-off that gained steam throughout the session, Xinhua reported.
The blue-chip indexes on all the major European stock exchanges lost at least 2 per cent in Thursday’s session and the euro currency gained against the US dollar and other currencies amid the prospect that the ECB would maintain its policy of increasing interest rates longer than the US Federal Reserve.
ECB chief Christine Lagarde has said in recent weeks that the bank would increase interest rates at its meeting later in July, despite pleas from leaders of Europe countries to stop the rate hikes. Lagarde has said high inflation remains a persistent problem in the 20 countries that make up the euro currency zone.
In Italy, Prime Minister Giorgia Meloni last week blasted the ECB for steadily raising interest rates, calling the policy “simplistic” and “likely to do more harm than good”. The fear in Italy is that higher interest rates will act as a drag on economic growth and impact countries’ fragile economic recoveries.
Meloni was not the only European leader to criticise the ECB rate hike plan, though she was the most vocal about it.
On Thursday, selling early in the session gained momentum throughout the day.
By the time of the closing bell, the main index on the Italian Stock Exchange in Milan was down 2.5 per cent; in Frankfurt, blue chips were down 2.6 per cent; in Paris 3.1 per cent; in Madrid by 2.1 per cent; and in Amsterdam, the main index was down 2.2 per cent.
Broad indexes were also lower, with the Euronext 100 losing 2.8 per cent of its value and the Stoxx Europe 600 falling 2.3 per cent. Even Euronext, the holding company that runs seven European stock exchanges, suffered losses, with its shares falling 4.4 per cent, their biggest one-day decline since September.
The euro currency, meanwhile, gained against the US dollar Thursday as the likelihood of higher interest rates in Europe attracted the attention of currency traders.
The ECB raised interest rates for the eighth consecutive meeting in June, bringing them to their highest level in 22 years. The ECB is trying to bring inflation down to its target of 2 per cent, though its models indicate that will not happen until 2025.
Preliminary figures show the eurozone’s year-on-year inflation rate in June was 5.5 per cent, down from 6.1 per cent a month earlier.
Inflation in Europe started surging last year, fuelled by record-high energy prices, which in turn were triggered by the conflict between Russia and Ukraine. While energy prices have stabilised in recent months, inflation has remained stubbornly high due to persistently high prices in some sectors, including food production and transportation.
The next meeting of the ECB is scheduled to take place on July 27 in Frankfurt.-Bernama