European stocks close in considerable decline on a series of factors

The European stock market closed down considerably this Thursday (29) in the case of Milan of more than 2%.

The opening was already negative and the picture worsened after UK Prime Minister Liz Truss defended her fiscal plan, which was poorly received last week by the markets.

European Central Bank (ECB) indicators and speeches were also on the radar, with weakness in New York later in the trading session also playing a role.

The pan-European Stoxx 600 index closed down 1.67% at 382.89 points.

Liz Truss dismissed criticism from the International Monetary Fund (IMF) of the tax cut package and said she was willing to make “tough decisions” to help the country’s economy recover.

The pound has touched an all-time low in recent days and interest rates on UK bonds (gilts) rose sharply to their highest since 2008, following the announcement of the new government’s plans.

High Frequency Economics, for example, comments that the fiscal plan, if implemented, will increase the current account deficit.

Western Union points out that the move could worsen already high inflation and lead to “substantially higher interest rates in the UK, a tough environment for the economy to grow”.

Oxford Economics, in turn, assessed the situation in the euro zone. According to her, high-frequency data suggest that the recent strength of consumption in the region should not last.

Recent indicators show that spending on discretionary services, such as restaurants, is falling.

Oxford still says weak real incomes and a worsening job market should contain inflationary pressures, but the European Central Bank (ECB) will continue with its “mission to aggressively fight current inflation”.

On the indicator agenda, the euro zone economic sentiment index dropped from 97.3 points in August to 93.7 in September, the lowest since November 2020.

Analysts had predicted 96.0. Among ECB leaders, several advocated further monetary tightening.

Madis Muller, for example, spoke of a “significant” rise in interest rates in October, without citing figures.

ECB deputy Luis de Guindos said fiscal policies cannot trigger inflation and need to be temporary, coincidentally or not, at a time when the issue is in focus in the UK.

• On the London Stock Exchange, the FTSE 100 index closed down 1.77%, at 6,881.59 points.
• In Frankfurt, the DAX index fell 1.71% to 11,975.55 points.
• On the Paris Stock Exchange, the CAC 40 index fell 1.53% to 5,676.87 points.
• The FTSE MIB index, on the Milan Stock Exchange, closed down 2.40%, at 20,352.98 points.
• In Madrid, the IBEX 35 registered a drop of 1.91%, at 7,300.10 points.
• On the Lisbon Stock Exchange, the PSI 20 dropped 1.72%, to 5,292.38 points.