Central banks and bank issues affect European stock prices

European stocks were seeing negative performances as caution dominates investors’ expectations amid the numerous company earnings releases in the US and the central banks’ meetings ahead as well as some important economic data publications. Markets could see some losses and volatility during the coming days after investors recorded successive gains during the last few weeks. In this regard, traders could move to secure their gains, erring on the side of caution in the face of the current uncertainties.

Banks’ earnings publications have reignited the fears that followed the failure of a number of financial institutions in March. Some banks have revealed losing billions in deposits as clients look for a safe haven for their funds. The trend revealed a continuing loss of confidence among bank clients which could exacerbate the current situation for the sector and expose other banks.

The banking sector could remain under stress as central banks continue to raise interest rates. The Federal Reserve could potentially raise rates one last time but could keep them at elevated levels while inflation comes under control, which could leave US regional banks under pressure for the time being. In Europe, the European central bank could maintain its aggressive policy for longer. There is still some uncertainty as to whether the central bank will raise interest rates by 25 or 50 basis points at their early May meeting.

Some consumer-oriented sectors could come under pressure as well as investors monitor the developments in China. The country could move to reduce its economic stimulus which could affect European companies that have a significant presence there as they could see their results impacted for the remainder of the year. In this regard, traders could closely follow any new governmental decisions that could erode purchasing power.

The energy sector could also witness some pressures due to the unclear direction of oil markets at the moment. While energy companies have benefited from strong oil prices in the past, they could see themselves contending with lower price levels for some time. Over the long term, the Chinese rebound in demand could push prices up and help improve conditions in the energy sector.