Numb reception of the ECB in the euro markets with mixed signs

The main European markets seemed rather embarrassed to welcome the first interest rate hike in the eurozone in the last 11 years, with the indices moving wildly, completing the transactions in different signs.

In particular, the pan-European Stoxx 600 index closed at 424.4 points with an increase of 0.44% and the banks slightly strengthened by 0.3% while the energy sector recorded losses of 2%.

In a similar climate, the large-cap Stoxx 50 finished around unchanged.

In individual European charts, Germany’s DAX fell 0.27% to 13,246 points, Britain’s FTSE 100 rose slightly by 0.09% to 7,270 points, as did France’s CAC 40 which closed at 6,201 points with +0, 27%.

The trends were bearish in the European region, where in Spain the IBEX 35 showed a small drop of 0.2% to 8,012 points and in Italy the FTSE MIB fell by 0.7% to 21,196 points, amid political uncertainty and doubts caused by the ECB’s new tool.

The European Central Bank today raised interest rates for the first time in 11 years, by 50 basis points, while also approving a new bond tool that will ensure the transmission of its monetary policy.

Regarding interest rates, despite the aggressive path of 50 bp. that the ECB finally reached, concerns remain in the market that it was characteristically late.

According to Hinesh Patel of Quilter Investors, “The ECB waited too long relative to the Fed and the Bank of England, thus putting additional pressure on the euro, which is driving up inflation. The fall in industrial activity shows that this increase of interest rates is likely to have minimal impact”.

For her part, the head of the bank, Christine Lagarde, said at the press conference that inflation appears to be worsening and will remain at high levels for some time, while the economic outlook “clouds” mainly against the background of the war in Ukraine, although to time, the ECB’s estimates do not include a recession scenario.

As for the tool that will ensure the transmission of the Bank’s monetary policy by intervening in the bond market, the TPI, the market seems troubled at the moment, perhaps due to a lack of clarity.

It is indicative that the Italian bonds took off after the announcements, with the spread of the Italian ten-year reaching almost 250 basis points, while although it declined along the way, it remained elevated during the day.

According to Reuters, analysts find it difficult to determine what is driving investors, but point to a lack of details and the existence of strict conditions as possible reasons behind the selloff in Italian stocks.

Elsewhere in political developments, the country is headed for early elections most likely on September 25 after Prime Minister Mario Draghi tendered his resignation following the collapse of the national unity government.