European stocks were sharply lower in afternoon trade on Monday as investor sentiment was rattled by concerns that the U.S. Federal Reserve could be considering an imminent interest rate hike.
The pan-European STOXX 600 came off its session lows, last standing 1.6 percent down. Meanwhile all sectors posted solid losses, with basic resources, banks and autos all off more than 2 percent each.
Central bank jitters
Markets worldwide were shaken up on Monday, with Asian shares tumbling after all three major U.S. indices posted their worst drop since the Brexit vote in June on Friday, amid concerns that central banks would become less accommodative.
Last week, the European Central Bank did not take any further easing measures, instead keeping its monetary policy stance unchanged. This disappointed investors in the region.
Meanwhile, traders have been closely following comments by Fed officials for clues on the timing of a rate hike in the U.S. Recently, Fed speakers have sounded more hawkish. On Friday, Boston Fed PresidentEric Rosengren said that the U.S. economy has proven to be more resilient to exogenous risks and that “gradual tightening is likely to be appropriate.”
This week, Fed Governor Lael Brainard is scheduled to speak at the Chicago Council on Global Affairs after the European market close on Monday. Then traders will be watching for retail sales data on Thursday – one of the most important indicators the Federal Reserve is set to see before it meets on September 20.
On the heels of a global equities sell-off, U.S. stocks opened lower Monday as investors contemplated when the Federal Reserve would raise interest rates.
Oil, miners slump
Commodity stocks were some of the worst performers on Monday following a fall in the price of oil and on the prospect that a U.S. interest rate hike would strengthen the dollar. This makes it more expensive for companies to buy dollar-denominated commodities.
The STOXX 600’s Basic Resources sector under-performed its fellow industries, off more than 3 percent. London-listed stocks Anglo American, BHP Billiton and Antofagasta were all off 4 percent or more each, which added pressure to the FTSE 100.
Oil and gas stocks were also sharply lower amid a slide in the price of crude. An increased rig count in the U.S. drove the oil price decline.Brent last hovered around $47.15, while U.S. WTI slipped, trading just below $45 a barrel.
In individual stock news, German utility E.ON was down 14 percent as Uniper, the power generation and energy trading business being spun off by the company, was due to start trading in Frankfurt.
Primark owner AB Foods said on Monday that it was raising its full-year earnings outlook, however shares tumbled 10 percent in trade.
One standout stock on the STOXX 600 was lighting firm Osram. Shares of the German group rose 8 percent after Bloomberg reported that Siemens was considering selling its 17 percent stake of Osram Licht, citing unnamed sources.