On Wednesday, the key European stock indices declined. Market makers were anxiously awaiting the outcome of the US Senate elections. It will have a significant impact on the balance of power in the country. In addition, investors continue to analyze corporate earnings reports for the third quarter of 2022 from top European companies.
At the time of writing, the composite index of Europe's leading companies STOXX Europe 600 sank by 0.66% to 418.81 points.
The French CAC 40 dropped by 0.33%, the British FTSE 100 lost 0.46%, and the German DAX fell by 0.67%.
Top gainers and losers
The stocks of German distribution company Brenntag rose by 1.6%. Its profits significantly exceeded preliminary expectations of analysts in the third quarter 2022. In addition, Brenntag's management said that it was able to balance EU and global supply chains due to the impact of increased energy costs.
The stocks of German sporting goods maker Adidas AG dropped by 0.1%. In July-September, the company nearly tripled its net profits despite revenue growth. Moreover, the management of Adidas worsened its net profit forecast for the fourth time since the start of 2022. Earlier, the manufacturer of sporting goods terminated a contract with rapper Kanye West, which was the key reason for the negative financial consequences.
The market capitalization of British department store chain Marks & Spencer Group Plc plummeted by 6.2%. In the first half of fiscal 2023, the company increased its pre-tax profits. At the same time, M&S management reaffirmed its full-year outlook. However, it postponed the decision to resume dividend payments to security holders.
The stocks of Germany's second-largest bank Commerzbank AG fell by 6.2%. The German lender cut its net profits by 52% in the third quarter of 2022 amid problems in its Polish unit.
The stocks of German pharmaceutical company Evotec SE plummeted by 9%. In January-September 2022, the company made a net loss.
The stocks of Swedish energy company Orron Energy rose by 3.8%.
The market capitalization of German military and industrial company Rheinmetall AG jumped by 3.6%.
The stocks of Dutch-Belgian supermarket group Ahold Delhaize increased by 1.8%. Earlier, the company raised its annual forecast for the third time this year due to a significant increase in sales and income in July and September.
The stocks of Dutch bank ABN Amro rose by 4.4% amid a more than twofold increase in net profits in the third quarter of fiscal 2022.
Market sentiment
In addition to analyzing the quarterly reports of the EU top companies, European investors also closely monitored the US news on Wednesday. For example, voting in the midterm Senate elections began there on Tuesday. Analysts and market participants expect Republicans to control the House of Representatives. Meanwhile, the battle for a majority in the Senate continues with both parties having roughly equal chances of winning.
It is assumed that Republicans gaining control of the House of Representatives could trigger budget spending cuts and easing of regulations previously adopted by the Democratic Party.
On Thursday, the US will release the latest data on October's national inflation rate, one of the most anticipated events for investors around the world. Experts predict that the US consumer price index will fall to 8% in October from 8.2% in September. The final data will become a decisive argument on the further course of monetary policy for the US Federal Reserve System, which is closely monitored by other central banks of the world.
On Wednesday morning, the news came that the consumer price level in China fell to a May low in October. Thus, the CPI index rose by 2.1% year-on-year in October following a 2.8% increase in September. In this case, analysts on average expected a slowdown in inflation to only 2.4%.
The index increased by 0.1% in October in monthly terms after rising by 0.3% a month earlier, while analysts expected the growth rate to remain at the September level.
On Wednesday, stock market makers expected the publication of data on retail sales in the EU countries for September. According to experts' preliminary forecasts, this indicator will grow by 0.4% in monthly terms and decline by 1.3% in annual terms.
Previous trading results
On Tuesday, the key European stock indices closed in the green zone, hitting an eight-week high. Shares of the technological and retail sectors were the top gainers the day before. Meanwhile, shares of oil and gas companies became the top losers amid a decline in global oil prices due to slowdown in demand and fears of recession.
As a result, the STOXX Europe 600 composite index of Europe's leading companies rose by 0.78% to 421.61 points.
The French CAC 40 gained 0.39%, the British FTSE 100 added 0.08%, and the German DAX advanced by 1.15%.
The stocks of British construction company Persimmon sank by 5.2%. Earlier, its management said that it expected a significant decline in sales in 2023 due to permanently rising inflation and a coming recession.
The stocks of German pharmaceutical concern Bayer AG fell by 4.8%. In the third quarter of fiscal 2022, the company increased its net profit by 6.4 times and confirmed its forecast for 2022. At the same time, the final profit of Bayer AG was worse than analysts had previously expected.
The market capitalization of Swedish carmaker Volvo Car rose by 4%.
The stocks of French carmaker Renault fell by 3.3%. Earlier, the company announced its plans to increase its operating margin to more than 10% by 2030 and restore dividend payments in 2023 by separating its electric car business into a separate division.
The stocks of Associated British Foods Plc (AB Foods) rose by 2.1%. The retailer grew its operating profit by 42% in 2020-2021. In addition, AB Foods' management announced the start of a £500 million ($576 million) share buyback program as well as an 8% increase in dividends.
The stocks of Danish jewelry Pandora soared by 10.6% amid the increase in net earnings to 734 million Danish kroner in July-September compared with 635 million Danish kroner in the same period of 2021. The jewelry chain's revenue rose by 11% to 5.26 billion kroner. Moreover, the company reaffirmed its financial outlook until the end of 2022.
The market capitalization of German reinsurer Munich Reinsurance jumped by 2.7% thanks to a significant increase in net income in the third quarter of fiscal 2022.
The stocks of German sporting goods maker Adidas rose by 4.4% on the news that Bjorn Gulden, the current head of Puma, will lead the company from January 1, 2023.
The stocks of British advertising holding WPP PLC jumped by 2.4%. Earlier, the news came that the company's CFO John Rogers had decided to resign.
Bloomberg, the global news agency, reported on Tuesday that more than a quarter of local households in the UK were facing financial difficulties, according to surveys. The final result was twice as much as a year earlier. UK residents believed high food prices and rising mortgage payments are the key reasons for the current financial difficulties.
Meanwhile, according to the British Retail Consortium (BRC), retail sales in the UK surged by 1.2% last month compared to October 2021. The pace of increase dropped from a 1.8% jump in September as local consumers struggled with rising costs of living.