European shares were still lower at lunchtime on Thursday after the US Federal Reserve said it might curb stimulus measures sooner than expected as the pace of the post Covid pandemic recovery stoked inflationary fears.
The pan-European Stoxx 600 index was down 0.4%, with the UK’s FTSE 100 down 0.66%. US markets closed lower overnight as the US central bank said two possible rate rises could be implemented by the end of 2023.
“The bond market reaction was a little sharper with 10-year yields pushing back towards the 1.6% level, putting them back where they were at the beginning of last week, while the 2-year yields shot up to a post pandemic high above 0.20%,” said Michael Hewson at CMC Markets.
“This reaction may serve as a useful reminder that while central banks may seem fairly relaxed about the inflation outlook, they still have to look a lot further out, and realistically if the economy improves as expected, monetary policy will have to change.”
“The fact that the Federal Reserve are slowly preparing the ground now may well be unsettling for markets but it is also necessary, and in the here and now, monetary policy still hasn’t changed that much.”
In equity markets, shares in online train and coach ticket platform Trainline rose after reporting a 324% increase in first- quarter sales as commuter travel started to recover as Covid lockdowns eased.
Premier Inn owner Whitbread was also higher as it held guidance and forecast strong UK summer demand, despite a slump in sales growth and extension of the UK government’s lockdown by a month.
Mining stocks were lower as the gold price fell, with Glencore, BHP, Anglo American and Antofagasta all down.
Shares in safety equipment specialist Halma slumped after Berenberg said in a note that the stock’s valuation “remains a hurdle”.
Dr Martens was also in the red as the iconic boot brand reported a jump in full-year revenue in its first results as a listed company but a drop in profit due to costs associated with the float.
Travel and leisure stocks all rose on reports that fully vaccinated Britons could be exempt from quarantine after an amber list holiday. British Airways and Iberia parent IAG, budget airlines easyJet and Wizz, travel company Tui, cruise operator Carnival, Upper Crust owner SSP, engine maker Rolls-Royce, InterContinental Hotels and WH Smith were all higher.
EasyJet was also boosted by news of 12 new UK domestic services as it looks to capitalise on demand for staycations.
