The drums of recession are beating in Europe. this investors Acknowledge that 2023 will be a very difficult year, and tough talk is acceptable. Christine Lagarde, at the press conference she held after the ECB interest rate hike, which is currently at the level of 2.5%, predicts that the increase in the price of money will continue to expand in the coming months. This time, the ECB softened the increase to 0.5 points, but the head of the institution warned that more hikes would come. “If three new increases of 0.5 are made, the rates reach 4%. That’s what the markets perceive, and that’s why the overall declines in European markets,” explains Joaquín Robles, analyst at XTB investment house.
The Spanish index is down more than 1.5% in this Thursday’s session. Eurostoxx 50, which brings together Europe’s major stocks, lost 3% of its value. The French index CAC 40 lost 2.61%, while the German Dax 30 lost nearly 2.81%. Frankfurt was separated by 3% and Milan by 2.91%..
Most damaged values mountain goat 35 has BBVA, which lost almost 4% and Banco Santander, which lost more than 2%. “While the rise in interest rates will benefit banks, they predict that next year’s recession could hurt their business and increase their default rate, forcing them to increase provisions,” Robles explains. not yet reflected in the market.
recession in 2023
The ECB’s Governing Council is preparing the market for further rate hikes using much harsher language than expected. “With the available data, it’s clear that we expect to raise interest rates by 50 basis points for a considerable period of time.”, the head of the institution, Christine Lagarde, said at the press conference. The ECB also stated that it expects the euro zone to enter recession in the first quarter of 2023 as it expects the European economy to contract in the fourth quarter of this year and continue in the next period. The ECB added to the Federal Reserve’s increases this Thursday, which raised interest rates by 0.5 percentage points to the range of 4.25% to 4.5%. Both the Bank of England, Switzerland and Norway joined the Federal Reserve and also raised interest rates.
Another effect of the increase in interest rates is the increase in debt interests. Spanish bonds with a maturity of 2032 rose 20 basis points to 3.16%., the largest increase since last June. Italian ten-year bond rose 27 basis points to 4.129 percent.