Europe: Shares slip as central bank meetings loom, Croda falls on profit warning

EUROPEAN shares slipped on Friday (Jun 9), rounding off a lacklustre week that saw investors step to the sidelines ahead of crucial updates from the US Fed and European Central Bank (ECB), while Croda slid on a tepid profit outlook.

The pan-European Stoxx 600 index closed 0.2 per cent down and ended the week 0.5 per cent lower.

Investors feared that the Fed could opt for a hawkish stance in its meeting next week, while the ECB is expected to continue to tighten monetary policy.

Money markets now see a 73 per cent chance that the Fed will skip raising interest rates in its June meeting but will resume rate hiking in July. For the ECB, traders see about a 98 per cent chance of a 25-basis-point rate hike next week.

“Our view on the Fed is that they want to pause... We do however, expect the Fed to keep the door open for another hike in July,” Mohit Kumar, a strategist at Jefferies, said.

“ECB is in a slightly different position as we do not believe that it is in the ‘sufficiently restrictive territory’ yet. We expect a rate hike in June followed by another in July and that should mark the end of the current rate hiking cycle.”

Weakness in the rate-sensitive insurance sector and banks weighed on the Stoxx 600, with the sectors down 0.5 per cent and 0.4 per cent, respectively.

Shares of Croda International tumbled 12.5 per cent to the bottom of Stoxx 600 after the British chemicals company forecast its annual pre-tax earnings to come in below expectations.

The broader European chemicals index fell 2 per cent, leading sectoral declines. Chemicals also fell the most among major European sectors for the week, down 3 per cent.

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