Nervousness in Euromarkets pending ECB

LAST UPDATE: 10.47

Volatile nervousness prevailed in euro markets on Thursday as investors expected the European Central Bank (ECB) to raise interest rates for the first time in 11 years in a bid to tackle a historic rise in inflation. Meanwhile, Italy suffered major losses amid political chaos as Italian Prime Minister Mario Draghi announced his resignation.

In this climate, the pan-European Stoxx 600 shows losses of 0.16% at 421.85 points while the other pan-European Stoxx 50 loses 0.29%.

In the rest of the board, the German DAX declines by 0.42%, the British FTSE 100 the French also slips by 0.36% CAC-40 loses 0.17%.

In the periphery, the Spanish IBEX-35 the Italian also recorded a drop of 0.47% FTSE MIB loses 2.02%.

With rising prices an ever-increasing concern for households, companies and governments in the eurozone, the ECB may even deviate from its program and consider an increase of half a percentage point at today’s meeting. In fact, reports that it is considering such a move have led ABN Amro to change its forecast to a 50 basis point increase instead of 25. Money markets see it as 50-50. The ECB’s decision comes at a time of slowing growth amid the war in Ukraine and threats to energy supplies.

Meanwhile, Italy has been plunged into fresh political uncertainty as Draghi told parliament on Thursday he would step down, paving the way for new elections, after some ruling coalition parties abstained from yesterday’s confidence vote. Draghi won the vote, but many senators refused to participate, bringing the government to the brink of collapse. Snap elections could now be held in September or October.

On the issue of energy supplies to the region, Russia began sending natural gas through its largest pipeline to Europe after the end of a 10-day period of maintenance work, Bloomberg reported.

Price hikes continue to hit the region. On Wednesday, data from the United Kingdom showed inflation hit yet another new 40-year high in June as food and energy prices continued to rise, escalating the country’s historic cost-of-living crisis.

In today’s macros, sentiment in the French manufacturing sector worsened in July amid rising energy prices and uncertainty stemming from the war in Ukraine. French manufacturing sentiment stood at 106 on a monthly basis, down from 108 in June, according to statistics agency Insee. Economists had expected it to be 106.5 points.