Stocks diverge before major UK, ECB announcements

LONDON (AFP): European stock markets traded mixed Thursday, ahead of major policy decisions from Britain and the European Central Bank aimed at tackling sky-high inflation.

The pound remained close to a 37-year low against the dollar that was struck Wednesday, as new British Prime Minister Liz Truss prepared to announce that she will freeze domestic fuel bills to help ease the burden of a UK cost-of-living crisis.

The euro steadied versus the greenback, with the ECB forecast to hike eurozone interest rates by a record-high 75 basis points.

Oil prices dropped further on fears of a global recession but losses were far less sharp than on Wednesday.

“There may be fresh storms brewing for the global economy but inflation is the tornado to tame and the drop in crude prices has lifted hopes in the US at least that the price spiral may be easier to control,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Fears abound that global central bank moves to rein in runaway inflation by ratcheting up borrowing costs will spark recessions in leading economies.

The dollar has moved ever higher against its major peers in recent weeks as investors flood into the currency hoping for better returns and as they seek a haven in the face of economic turmoil.

The US unit is closing in on a 32-year peak against the yen owing to the Bank of Japan’s refusal to raise interest rates.

Observers expect the dollar to keep attracting strong interest as long as the Federal Reserve keeps ramping up US interest rates by sizeable amounts.

The Fed holds its next policy meeting on September 21, with a third successive 75-basis-point lift forecast.

“For years, central bank interest rate decisions used to be background noise, with investors confident that rates would stay low,” Russ Mould, investment director at AJ Bell, said Thursday.

“This year they’ve become must-watch events, with every word studied by the market. The current theme is not whether central banks will raise rates, but by how much.”

On the corporate front, shares in cyber security company Darktrace crashed around 30 percent after US private equity firm Thoma Bravo ended its takeover interest in the British group.