European markets buck the trend as interest rate fears grip global economy

May 03, 2023 (MLN): European markets advanced in early trade on Wednesday, bucking slides in Asia and the United States driven by fears of banking sector turmoil and jitters over interest rates, as APP reported. 

London, Frankfurt, and Paris were all enjoying modest gains as cautious investors awaited an anticipated US Federal Reserve interest rate hike later in the day, as well as a similar decision by the European Central Bank expected on Thursday.

"Caution is set to take center stage ahead of the Fed's interest rate decision later, as investors mull what's ahead for the mighty US economy," said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

Interest rate worries had the opposite effect on Wall Street the day before, conspiring with falling confidence in regional banks to fuel losses that bled over into Asia as Wednesday's trading got underway.

Sydney finished nearly 1% down after the Australian central bank hiked interest rates there to an 11-year high -- a surprise move that dashed hopes it would hold rates steady as inflation showed signs of slowing.

Hong Kong, meanwhile, finished 1.2% down, and Seoul, Taipei, Wellington, Jakarta, Singapore, Kuala Lumpur, Mumbai, Bangkok, and Manila were all in the red as well. Markets in Japan and mainland China were closed for the holidays.

Oil prices, meanwhile, sank even lower on Wednesday after tumbling the day before, with the US benchmark oil contract, WTI, briefly dipping under $70 per barrel for the first time since OPEC+ cut output a month ago.

The main international contract, Brent North Sea, was also down, trading under $74 per barrel. The recent drops have erased gains seen after the OPEC+ production cut was announced at the beginning of April.

"Downward price pressure could persist in oil markets until it becomes clear that a significant recession will be avoided and growth in global oil demand won't be stunted," Innes said.

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