FX.co ★ European stock market opened weekly trading with growth

The key stock indicators of Western Europe show a slight increase on Monday. Market participants are analyzing the latest information from the People's Republic of China about the lowering of the key rate by the central bank amid weak data on the country's economy. The quarterly reports of the largest European companies also continue to be in the focus of investors' attention.

Thus, by the time of writing, the aggregate indicator of the leading companies in Europe, the STOXX Europe 600, increased by 0.29% to 442.12 points. The highest results among the index components are shown by the securities of the German generating company Uniper (+7.7%) and the Italian Telecom Italia (+6%).

The list of declines among the components of the STOXX Europe 600 was led by shares of the Swedish oil and gas company Arrow Energy AB (-4.8%).

Meanwhile, the French CAC 40 rose 0.11%, the German DAX lost 0.02%, and the British FTSE 100 rose 0.13%.

Growth and Fall Leaders

The value of securities of the British-Swedish pharmaceutical company AstraZeneca PLC rose by 2.6%. The day before, the management of the drug manufacturer announced that its anti-cancer drug Enhertu slowed the progression of one of the forms of breast cancer in patients. This statement by AstraZeneca's management has increased the prospects of obtaining new permits from regulators in the healthcare sector.

Quotes from the German consumer goods company Henkel AG & Co.St increased by 0.4%. The day before, the company reported that in the first quarter of fiscal year 2022, it increased sales by 8.9%, but reduced profits amid higher prices for raw materials and transportation

The market capitalization of the German food delivery service and grocery packages HelloFresh soared by 9.1%. The company confirmed its annual forecasts and said it expects revenue growth of 18-23%.

The share price of the British consulting company TP Group PLC increased by 1.4%. On Monday, the company released its audited financial statements for last year, according to which its pre-tax loss in annual terms increased to $9.7 million.

The value of the securities of the Dutch aircraft manufacturer Airbus SE sank by 0.4%, despite the news about the purchase of twenty A330-900 aircraft from it by the Malaysian company Malaysia Aviation Group.

Market Sentiment

On Monday morning, Chinese media reported that the People's Bank of China poured about $60 billion into the country's financial system under the medium-term lending program (MLF).

In addition, the central bank reduced the interest rate on loans for a year issued under MLF by 10 basis points – to 2.75% from 2.85%. Traditionally, a rate cut by the central bank signals a slowdown in the Chinese economy in the past month.

Analysts say the world's second-largest economy has still not recovered from the damage caused by strict coronavirus restrictions.

Thus, in July, the country's industrial production increased by 3.8% year-on-year compared to June's 3.9%. At the same time, economists had forecast growth of 4.6%.

The volume of retail sales in China rose by 2.7% compared to a year earlier. At the same time, experts predicted an increase of 5%.

Participants of the European stock market analyze data from China with high caution and avoid decisive steps. At the same time, protective assets – securities of European healthcare and telecommunications companies - are becoming a key upward factor for the indices.

Macro statistics for the region also became an additional catalyst for the growth of European stock markets. So, in April-June 2022, the Danish economy grew stronger than the market predicted – by 0.7% compared to January-March.

Meanwhile, the growth of wholesale prices in Germany in the past month decreased to 19.5% in annual terms after a June increase of 21.2%. In monthly terms, prices decreased by 0.4%.

Trading Results Prior

Last Friday, European stock exchange indicators showed an active rise amid the release of strong statistics from the euro region and the UK.

As a result, the aggregate indicator of the leading companies in Europe, the STOXX Europe 600, increased by 0.16% to 440.87 points.

Meanwhile, the French CAC 40 rose 0.14%, the German DAX gained 0.74%, and the British FTSE 100 rose 0.47%.

Following the results of the past week, European stock indicators also showed a spectacular increase: the FTSE 100 rose by 0.8%, the CAC 40 – by 1.3%, and the DAX – by 1.6%.

The main reason for the permanent positive dynamics in the stock market was the data on the slowdown in annual inflation in the United States, which gave investors hope for easing monetary policy by the US Federal Reserve.

So, last Wednesday, the US Department of Labor published a report on the consumer price index, according to which annual inflation in the country slowed to 8.5% by the end of July. The current slowdown was the first in the past five months of 2022.

Earlier, market analysts stated that in July, the annual inflation rate in the country will decrease only to 8.7% from June 9.1% (the highest since 1981).

Traditionally, a decrease in the inflation rate is a clear signal to the Fed about the need for a less sharp increase in base interest rates in the future. The day before, analysts immediately lowered their forecast for the rate. According to CME Group, the largest North American financial derivatives market, 61.5% of analysts now expect this indicator to increase by 50 basis points during the September meeting.

At the same time, most experts previously predicted its third consecutive increase by 75 basis points.

The focus of European investors' attention on Friday was the release of the next batch of quarterly reports of leading companies in the region, as well as statistics on the countries of the euro region.

Thus, according to preliminary data from the Office of the National Statistics of the United Kingdom, in the second quarter of 2022, the country's GDP grew by 2.9% in annual terms, and fell by 0.1% in the quarter. At the same time, analysts predicted an increase of 2.8% and a drop of 0.3%, respectively. By the way, this decrease was the first in more than a year.

Also, the ONS reported an increase in industrial production in the country in June by 2.4% year-on-year and a drop of 0.9% month-on-month. At the same time, the market assumed an increase in the first indicator by 1.6% and a decrease in the second by 1.3%.

Recall that during the meeting last week, the Bank of England made a forecast according to which in the fourth quarter of 2022, the UK economy will face a protracted recession amid a permanent increase in inflation.

In the past month, the level of consumer prices in France soared to 6.8% in annual terms, which was a record increase for the entire time the indicator was calculated. July inflation accelerated by 0.3% compared to June.

Meanwhile, industrial output in the eurozone rose 0.7% in June after a sharp increase of 2.1% in May. In annual terms, this indicator rose by 2.4% after an increase of 1.6% a month earlier.

On Friday, the value of the securities of the British-Dutch oil and gas giant Shell rose by 0.2%.

The share prices of the German telecommunications company Deutsche Telekom AG sank by 1.3%. In the second quarter of fiscal year 2022, the net profit of this communications giant decreased by 22%.

At the same time, the company improved its annual adjusted profit forecast for the second time in a year thanks to the good performance of the American wireless operator T-Mobile US, Inc., owned by German Deutsche Telekom AG. On Friday, the company confirmed plans to increase its stake in T-Mobile US and announced that it will soon receive a majority stake in it.