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European Stocks Stable after Inflation Driven Decline

On Tuesday, European stocks climbed higher, as investors were quick to snap up equities that had taken a battering. This came after a massive sell-off in the last few sessions because of worries about the US Federal Reserve getting more aggressive in terms of interest rate hikes and the possibility of an economic recession.

Equities Move Up

The pan-European STOXX 600 recorded an increase of 0.1%, after it had declined by 2.4% on Monday to hit three-month lows. The sectorial gains in European equities were led by gas and oil stocks as well as battered banks. Meanwhile, the greatest declines were recorded in real estate. The S&P 500 benchmark index for the US had confirmed on Monday that it has entered a bear market.

The index recorded a more than 20% drop from its highest closing value, due to increasing concerns about an interest rate hike from the US Federal Reserve that would leave the economy vulnerable to recession. The investor focus has now shifted towards the meeting of the Fed scheduled for Wednesday in which the central bank is expected to announce an increase in the interest rate by 75 basis points, after the hotter than expected inflation data on Friday.

Market analysts stated that the risk of a recession has increased because of the aggressive stance of the US Federal Reserve. They said that history shows good performance in value sectors when inflation goes past 3%. The UK market and the energy sector is in favor because it comprises of these value stocks.

The STOXX 600 index has seen a broad sell-off recently and has declined almost 17% since January, when it had reached an all-time high. This is because the euro zone is also experiencing record high inflation, the Chinese economy is slowing down and financial conditions are tightening. There was a 0.7% increase in gas and oil stocks, as worries about tight global supplies saw an increase in prices of crude per barrel by $1.

Performance of Individual Stocks

There was a 0.5% increase recorded by SAP, the business software group, based in Germany. This occurred after upbeat results for the quarter were posted by US company Oracle Corp, as its cloud products saw a rise in demand.

There was also an 18.7% drop in the shares of Atos, after the French tech firm disclosed that it was planning on splitting its operations. The company will sell its assets and Rodolphe Belmer, the chief executive of the firm, is also leaving.

A 5% drop was also seen in Akzo Nobel, a Dutch company of coatings and paints. This occurred after the company issued a warning about its operating income taking a hit because of the continued COVID-19 lockdowns in China. Plus, decorative paints have also seen a weaker demand in Europe of late.

With uncertainty rising in the market and the meetings scheduled for this week, it is likely that the stock market will continue to be volatile for the next few sessions.

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