European Stocks Trade Slightly Lower as Investors Weigh on ECB New Tool to Stem Stress

Stocks in Europe opened slightly lower on Friday as investors digested a new tool the European Central Bank had introduced to stem market stress after a higher-than-expected rate hike yesterday by 50bps.

As of 14:28 BKK time on July 22, 2022, DAX slipped 0.11%, CAC dipped 0.02%, STOXX600 fell 0.06% while FTSE increased 0.18%.

The European Central Bank surprised the market with a 50 basis point rate hike on Thursday, bringing its policy rate to zero.

The ECB had kept its benchmark at a negative territory since 2014 amid the region’s sovereign debt crisis and the coronavirus pandemic. Thursday marked the first rate hike in 11 years in a sign of acknowledgment on rising inflation in the bloc.

The Eurozone recorded a spike in annual inflation at 8.6% in June, the highest level on record. The number marked a significant jump from 8.1% in May.

The euro continued to drop against dollars from EUR1.0163 to EUR1.0153 per dollar as communication from the central bank yesterday was not hawkish and  the ECB President Christine Lagarde had de-facto removed prior guidance for the September meeting.

The new Transmission Protection Instrument (TPI) that the central bank invented for bond protection which was designed to cap borrowing costs across the region and limit fragmentation for indebted countries in southern Europe.