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Global equity sell-off sends European shares sharply lower

January 21, 2022
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By Anisha Sircar

Jan 21 (Reuters) - European stocks slumped on Friday, tracking a sell-off in global equity markets that was sparked by jitters around the pace of monetary policy tightening by central banks and weak economic data.

The pan-European STOXX 600 dropped 1.4% in broad-based selling and was on course for its worst day in nearly two weeks, as investors looked forward to the U.S. Federal Reserve's meeting next week for details on how it intends to tackle high inflation.

"There's a lot of speculation - four, five, six U.S. rate hikes this year, a 50 basis point hike in March - which has fed markets' underlying anxiety," said Craig Erlam, a senior market analyst at OANDA.

"We can never underestimate the knock-on effects of the U.S. on global markets, and Europe is facing challenges of its own with the Omicron variant and energy crisis," he said, adding that markets were even starting to price in potential tightening by the European Central Bank (ECB).

Cementing those concerns, ECB accounts showed policymakers argued at a meeting last month that inflation could "easily" get stuck above target, and the central bank should keep the door open to tightening policy.

Further, euro zone consumer prices jumped at a record pace in December, boosted by a surge in energy prices and supply chain bottlenecks.

The STOXX 600 is set for a third straight weekly decline, dragged by a more than 2% drop in tech stocks on fears of faster U.S. rate hikes ahead of the crucial Fed meeting.

Adding to worries, the Bank of England will press ahead with its tightening cycle next month as red-hot inflation runs well ahead of target, a Reuters poll found.


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