European stock markets faced a downturn midday Monday as traders assessed the impact of rising petroleum prices and the diminishing chances of rate cuts from major central banks, amid persistent inflation and robust job markets in the United States. The broader market witnessed significant losses, particularly in the technology sector, which struggled under the weight of these market changes.
Meanwhile, oil stocks saw a modest surge following the imposition of new sanctions by the US and UK on Russian oil, which could potentially restrict global oil supplies. Investors in Europe were also monitoring Wall Street futures that were indicating declines, alongside substantial losses on Asian exchanges.
This trend was largely attributed to expectations that the People’s Bank of China would adopt less accommodative monetary policies to support the yuan's foreign exchange rate. During this tumultuous period, the pan-continental Stoxx Europe 600 Index reported a decrease of 0.8% at mid-session. The sector-specific indices showcased varied performances: the Stoxx Europe 600 Technology Index declined by 1.3%, the Stoxx 600 Banks Index fell by 0.7%, while the Stoxx Europe 600 Oil and Gas Index managed to gain 0.8%.
In contrast, the Stoxx 600 Europe Food and Beverage Index saw a slight dip of 0.4%. Real Estate Investment Trusts (REITs) in Europe also faced setbacks, with the REITE index declining by 0.8%, while the Stoxx Europe 600 Retail Index fell by 0.9%. On the national front, Germany's DAX index was down by 0.8%, and London's FTSE 100 saw a decrease of 0.4%.
Meanwhile, the CAC 40 in Paris experienced a drop of 1%, and Spain's IBEX 35 recorded a loss of 0.6%. The yields on benchmark 10-year German bonds remained elevated, hovering near 2.59%. As for oil prices, front-month North Sea Brent crude oil futures rose by 1.7%, reaching $81.13 per barrel. Interestingly, the Euro Stoxx 50 volatility index increased by 7.1%, reaching 19.75, suggesting below-average volatility for European stock markets in the coming month, which is considered a positive indicator.
A volatility reading above 20 typically signals a more turbulent market, while a figure below 20 indicates a calmer trading environment..