European Stocks Fall Ahead of Central Bank Flurry; SocGen Slips

European shares fell on Monday in a broad riskoff move ahead of the US Federal Reserve’s policy meeting amid worries that interest rates will remain high for longer than previously expected.

(Bloomberg) — European shares fell on Monday in a broad riskoff move ahead of the US Federal Reserve’s policy meeting amid worries that interest rates will remain high for longer than previously expected.  

The Stoxx 600 Index dropped 0.9% as of 12:43 p.m. in London, with 86% of the constituents trading in the red. Societe Generale SA slumped after the bank’s new strategic plan disappointed analysts, while Nordic Semiconductor plunged after the chipmaker reduced quarterly revenue and margin forecasts. 

The retreat in the main regional benchmark comes after it recorded the biggest weekly advance in two months. Beyond the nervousness about the Fed this week, there are renewed fears about the health of the Chinese property sector, which dented Hong Kong stocks earlier in the day. US equity futures also were in the red, extending declines Friday on Wall Street. 

April LaRusse, head of investment specialists at Insight Investment said “the Fed or any other central bank this week will leave as much wiggle room as possible in terms of forward guidance.” 

“In terms of cuts next year, we’re thinking why rush unless the economy is actually contracting. There would be no reason to start cutting until the second half of next year,” she said in an interview with Bloomberg Television. While growth could stagnate and possibly contract but “it’s not going to be a 2008-sort of slowdown or anything like that,” she added.

Higher-for-longer rates expectations have kept global stocks under pressure. Economists anticipate no change in rates at the Fed’s meeting this week, but say there is potential for officials to pencil in one more move later this year.

Meanwhile, European Central Bank’s Governing Council member Martins Kazaks says betting that the bank cutting interest rates in the first half of next year would be a mistake.

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–With assistance from Michael Msika.

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