European stock markets have recorded their biggest monthly fall in over a year. The pan-European Stoxx 600 index, which covers a wide range of European stocks, fell by 3.9% this month.
European stocks closed higher on Monday, the last trading day of January, as investors weighed upcoming central bank decisions and geopolitical tensions between Russia and Ukraine. The pan-European Stoxx 600 index provisionally closed up 0.6%, with tech stocks jumping 2.9% to lead gains as most sectors and major bourses entered positive territory. The benchmark is on pace for its worst month since October 2020, however, as investors reassess their allocations amid fears over higher interest rates.
In terms of individual share price movement, British biotech firm Oxford Nanopore climbed 7% to lead the Stoxx 600. At the bottom of the European blue-chip index, French care home operator Orpea slid 7% after firing its CEO following allegations of patient abuse.
In Asia, shares closed mostly higher after a thin trading session, with markets closing early in Hong Kong and Singapore ahead of the Lunar New Year holidays. On Wall Street, U.S. stocks were higher Monday but still on track for monthly losses after a whirlwind period of trading.
Markets have been roiled by volatility in January as investors worry about inflation, supply chain issues and the upcoming rate hikes from the Federal Reserve. The Fed indicated last week that it is likely to raise interest rates for the first time in more than three years in order to combat historically high inflation. Markets are now pricing in five quarter-percentage-point interest rate hikes in 2022 with the first coming in March. The Bank of England and European Central Bank are set to deliver their latest policy decisions on Thursday, with the former expected to hike interest rates for a second time.
Meanwhile, geopolitics is also in focus for investors in Europe, who are keeping an eye on developments between Russia and Ukraine with the UN Security Council set to meet on Monday to discuss ongoing tensions between the neighbours amid a build-up of soldiers on Russia’s border with Ukraine. On the data front, eurozone GDP (gross domestic product) growth slowed in the fourth quarter of 2021, in line with expectations, rising 0.3% quarter-on-quarter for a 4.6% annual gain.
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