Skip Header
Important information: The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This is a third-party news feed and may not reflect Fidelity’s views.

Europe open: Shares slump as central bankers dampen hopes of early rate cuts

(Sharecast News) - European shares posted sharp falls at the open on Wednesday as policymakers continued to downplay prospects for early interest rate cuts, after UK inflation rose unexpectedly and weak data from China also hit sentiment. The pan-regional Stoxx 600 index was down 1.23% at 467.25 in early deals with all major bourses lower after weak sessions in the US and Asia.

Dutch central bank chief and European Central Bank board member Klaas Knot said markets were "getting ahead of themselves" with rate cut expectations.

"The problem for us is that in the end that might become self-defeating. We are optimistic that we have a credible prospect of a return of inflation to 2% in 2025. But a lot still needs to go well for that to happen," European Central Bank member Knot said told CNBC.

"Underlying that projection is an interest rate path, assumed interest rate path, that contains significantly less easing than is currently embedded in market pricing. So that runs the risk to become self-defeating."

Meanwhile in the US, Federal Reserve governor Christopher Waller said on Tuesday that interest rate cuts were likely this year, but warned there was "no reason to move as quickly or cut as rapidly as in the past", although he said the bank was within striking distance of hitting its 2% inflation target.

"When the time is right to begin lowering rates, I believe it can and should be lowered methodically and carefully," he added.

In the UK, inflation rose unexpectedly to 4% year-on-year in December against expectations of a small fall to 3.8%.

China's economy continued to struggle at the end of last year as it recorded another decline in population and fourth-quarter gross domestic product expanded at 5.2%, just missing estimates.

The population fell to 1.4 billion in 2023, with 11 million deaths and 9 million births as the impact of China's "one-child" policy continued to filter through and add to pressures from deflation and a property sector slowdown.

In equity news, miners were out of favour as the pound rose against the dollar and the China data dampened hopes of a recovery in the world's second biggest economy and consumer of raw materials. Chile-focused miner Antofagasta was down despite a rise in annual copper production. Glencore was also lower.

IMI rose on an upgrade to 'buy' from 'neutral' at Goldman Sachs.

Reporting by Frank Prenesti for

Share this article

Related Sharecast Articles

London close: Footsie hits another record, but BoE comments limit gains
(Sharecast News) - A weak performance from the heavyweight mining sector wasn't enough to stop the FTSE 100 from reaching a new record high on Tuesday, as London's blue-chip index rose for the fifth straight day.
Broker tips: HSBC, Reckitt Benckisser, Watches of Switzerland
(Sharecast News) - Citi said on Tuesday that it remains 'overweight' UK banks, with HSBC one of its top picks.
Director dealings: Porvair CFO raises stake
(Sharecast News) - Porvair revealed on Tuesday that chief financial officer James Mill had acquired 4,250 ordinary shares in the London-listed filtration and environmental technology group.
Europe close: Stocks rise as investors digest PMI data
(Sharecast News) - European markets closed above the waterline on Tuesday, propelled by positive survey data from the eurozone that bolstered investor sentiment.

Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

Award-winning online share dealing

Search, compare and select from thousands of shares.

Expert insights into investing your money

Our team of experts explore the world of share dealing.