LONDON: European stock markets rebounded Tuesday, shrugging off steep Asian losses on the eve of a Federal Reserve monetary policy decision and after tumbling the previous day on Ukraine tensions and US rate hike fears.
In late morning deals, Frankfurt equities won 0.9 percent, while London and Paris each gained 1.1 percent in value.
World oil prices also advanced strongly while the dollar strengthened ahead of this week’s Fed rate call.
All attention is now on the Fed’s two-day gathering that concludes Wednesday, with investors poring over every word from the bank’s statement and boss Jerome Powell’s subsequent news conference.
“Investors’ hands are already shaking after the bloodbath in equity markets so far in 2022, so that any aggressive moves by the Fed could cause a further sell-off among global shares,” said AJ Bell investment director Russ Mould.
“The central bank is fully aware it needs to act carefully, but equally it is unlikely to sit on hands given the inflationary pressures that need addressing.”
After spending much of last year playing down the spike in prices, the US central bank has in recent months taken a sharp hawkish turn on monetary policy as officials look to bring inflation — which is at a four-decade high — under control.
Minutes from the most recent meeting indicate it will begin lifting interest rates from March with three or possibly four more hikes before the end of the year.
On top of that, it plans to start offloading its vast bond holdings.
But while the move to battle runaway prices is seen as crucial, the end of the era of ultra-cheap cash for investors has rattled markets after almost two years of uninterrupted gains to record or multi-month highs.
Asian indices plunged Tuesday following a highly volatile day on Wall Street fuelled by fears about the Fed’s plans, with eyes also on Ukraine.
“Volatility is likely to prevail for the moment,” noted Interactive Investor analyst Richard Hunter.
Global equities were spooked Monday with London diving 2.6 percent while Frankfurt and Paris had each tumbled by almost four percent.
Wall Street stocks, however, staged a feverish comeback Monday after stumbling to multi-month lows.
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