European stocks were pushed lower Wednesday, in line with losses in other global equity markets as investors start to price in the probability that the Federal Reserve will ramp up its pace in raising borrowing costs this year.
How markets are trading
The Stoxx Europe 600 index SXXP, -0.32% fell 0.3% to 381.34. No sector was higher and the basic materials group fell the most. On Tuesday, the benchmark lost 0.2%.
Germany’s DAX 30 index DAX, -0.21% gave up 0.3% to 12,454.93, and France’s CAC 40 PX1, -0.35% fell 0.3% at 5,327.88.
The U.K.’s FTSE 100 UKX, -0.32% dropped 0.3% to 7,262.10, and Italy’s FTSE MIB I945, -0.07% was down 0.2% to 22,685.35. Italy will hold a general election on Sunday.
Read: Italian election — stocks to buy and avoid ahead of Sunday’s vote
The euro EURUSD, -0.0899% recently bought $1.2225, down from $1.2233 late Tuesday in New York.
Read: Hedge funds’ faith in euro dwindles ahead of political ‘Super Sunday’
Also read: What investors need to know about the most important date on Europe’s political calendar
What’s driving markets
European stocks followed declines in Asian trading HSI, -1.36% NIK, -1.44% and a selloff in stocks on Wall Street SPX, -1.27% on Tuesday.
Those losses came after Powell told congressional lawmakers that the U.S. economic outlook has strengthened since December. That was interpreted as a sign the Fed may raise interest rates four times this year, instead of three times, as it has previously signaled.
Read: 4 financial-market takeaways from Fed chief Jerome Powell’s debut
Persistent worries about higher borrowing rates have unsettled global markets this month, contributing to the likely February loss of 3.5% for the Stoxx 600. That would be the worst monthly performance since June 2016, FactSet data showed.
Opinion: Powell’s first faux pas came quick
Stock movers
Bayer AG shares BAYN, -2.95% slumped 3% after the pharmaceuticals and chemicals heavyweight posted a 67% fall in fourth-quarter net profit to €148 million euros ($181.9 million), due largely to a hit from the U.S. tax reforms.
ITV PLC shares ITV, -6.58% slid 4.9% after the broadcaster’s pretax profit of £500 million ($697.1 million) fell short of a FactSet consensus estimate of £558 million.
Erste Group Bank AG EBS, +3.38% climbed 3.7% after the Austrian lender said fourth-quarter net profit jumped to €328.6 million euros ($403.9 million), and proposed raising its full-year dividend by 20%.
Dialog Semiconductor PLC shares DLG, +9.89% leapt 8%, topping the Stoxx 600, and bioMerieux SA BIM, -9.93% shares sank 9% following the release of the biotech’s 2017 financial results.
What strategists are saying
• Fed funds are pricing in a probability of 99% for 3 hikes in 2018, up from around 60% previously, and 74% probability of 4 hikes. If there is a concerted effort to shift expectations about the Fed funds dot profile, our economists think it should be pretty obvious over various Fed speeches in coming weeks.”
–Sue Trinh, head of Asia FX strategy at RBC Capital Markets
•In Italy’s general election, a “grand coalition would be well received by markets because it could result in political stability, whereas repeat elections could prolong the uncertainty and thus weigh on Italian assets. While the Italian equity market has not priced in electoral uncertainty, we believe government bonds incorporate some political risk at current yields.”
– Matteo Ramenghi, chief investment officer at UBS in Italy
Economic data
French consumer spending dropped 1.9% on month and on year in January, as mild weather reduced household demand for energy, said French statistics agency Insee.
But France’s 2017 gross domestic product was upwardly revised to 2% from a previous estimate of 1.9%. GDP for the fourth quarter was unchanged at 0.6%.