FX.co ★ European markets could not stand the negative statistics and moved to the fall

The leading stock indicators of Western Europe showed a decline on Wednesday. Market participants are avoiding risks amid weak statistical data on the euro region. In addition, investors continue to analyze the latest information on US inflation.

So, by the time of writing, the aggregate indicator of the leading companies in Europe, the STOXX Europe 600, had plunged by 0.33% to 419.76 points.

Meanwhile, the French CAC 40 fell by 0.14%, the German DAX lost 0.32%, and the British FTSE 100 declined by 0.72%.

Leaders of Growth and Decline

The value of the securities of the German airline Deutsche Lufthansa AG plunged by 2.5%. The representatives of the Stabilization Fund of Germany reported that they completely sold the shares of the airline, making a profit of 760 million euros.

Quotes of the German manufacturer of loading and unloading equipment Kion Group AG fell by 21%. The company predicted a net loss based on the results of the third quarter amid disruptions in logistics chains and high energy prices.

The market capitalization of the Spanish owner of large chains of Industria de Diseno Textil SA (Inditex) increased by 5.2% after the release of strong corporate reporting for January-June. Thus, in the first half of fiscal year 2022, the owner of the popular Zara brand increased net profit by 41%, and revenue by 24.5%.

The share price of one of the largest housebuilders in the UK, Redrow, rose by 1% thanks to the recent report of its quarterly results. Thus, according to the report for the past period, the company significantly exceeded its pre-pandemic financial results.

The value of securities of the British home furniture retailer Dunelm Group Plc soared by 4% on the report of a healthy gross margin of 51.2%, despite record inflation figures.

Market Sentiment

The focus of European investors' attention on Wednesday is the latest statistical data on the eurozone. Thus, in July, the volume of industrial production in the EU countries fell by 2.4% year-on-year and by 2.3% month-on-month. At the same time, the market predicted an annual growth of 0.4% and a monthly decline of 1%.

Meanwhile, according to the National Statistical Office (ONS) of Great Britain, consumer prices in the country in August soared by 9.9% in annual terms. Compared to July, when inflation was 10.1%, the growth of the indicator slowed down slightly. At the same time, the consumer price index is still at its highest level in more than 40 years. By the way, market experts interviewed by the leading American financial information provider Bloomberg, on average predicted an increase in August inflation of only 10%.

The next meeting of the Bank of England will be held at the end of next week. Analysts assume that the British central bank will increase the interest rate by 75 basis points. Next Thursday, the central bank will have to adjust its further steps in monetary policy, taking into account the measures of the new Liz Truss government to limit energy prices.

Recall that during the August meeting, representatives of the BoE predicted that inflation in the country will reach a peak of 13.3% by the end of 2022, after which the UK will plunge into recession and will not come out of it until early 2024.

Today, participants in European exchanges continue to discuss data on annual inflation in the United States, which fell to only 8.3% in August from July's 8.5%. At the same time, analysts had previously assumed that the annual consumer price index in the country would decrease to 8.1% according to the results of the past month.

The final data from the US Department of Labor, published on Tuesday, caused tangible pessimism in world markets, since the level of August inflation will be carefully assessed by the Federal Reserve during the September meeting next week. Analysts are confident that amid a slight decrease in the consumer price index, the central bank will not refuse another rate hike by 75 basis points. So, last week, Fed Chairman Jerome Powell announced the central bank's readiness to "act decisively" in order to combat the record level of consumer prices in the country.

To date, approximately 90% of the market is confident that the US Fed will raise the base interest rate by 75 basis points. At the same time, the probability that the rate will be raised by only 50 basis points next week has practically disappeared.

An important downward factor for the key indicators of European stock exchanges on Wednesday was the weak results of the last trading session on the US stock market. So, on Tuesday, the Dow Jones Industrial Average index collapsed by almost 4%, which was its biggest one-day drop in the last two years. At the same time, the S&P 500 plunged by 4.32%, and the NASDAQ Composite – by 5.16%.

Trading Results the Day Before

On Tuesday, European stock indicators closed in the red zone after spectacular growth for several days in a row. The main catalyst for the fall for stock indicators was the disappointing US inflation data for August from the Ministry of Labor of the country.

As a result, the aggregate indicator of the leading companies in Europe, the STOXX Europe 600, fell by 1.55% to 421.13 points.

Meanwhile, the French CAC 40 declined by 1.39%, the German DAX lost 1.59%, and the British FTSE 100 plunged by 1.17%.

By the way, until Tuesday, the FTSE 100 showed steady growth for three consecutive sessions, the CAC 40 by five, and the DAX by two.

The value of securities of the Swiss bank UBS Group AG rose by 0.7%. The day before, the bank's management announced that it would increase dividends for 2022 by 10% to $0.55 per share. In addition, UBS Group expects that the volume of securities repurchases will exceed $5 billion this year.

The quotes of the British media company Future Plc soared by 5.6%. The company predicted that Future Plc's adjusted operating profit for the current year will be at the upper limit of market expectations.

The share price of the British online retailer Ocado Group Plc fell by 14.6%. Earlier, the company announced that it expects revenue to fall in 2022 amid a permanent decline in consumer demand due to rising prices.

The share price of the British retailer of goods for children Mothercare PLC soared by 60.7%. According to the results of the 2022 fiscal year, the company reported pre-tax profit on the background of an increase in international sales. By the way, according to the results of the 2021 fiscal year, Mothercare recorded a pre-tax loss.

An important upward factor for the key indicators of European stock exchanges on Tuesday was the strong statistics on the UK. So, in May-July, unemployment in the country fell to 3.6% – the lowest since 1974. The reason for such a spectacular drop in the indicator was the fact that a large number of people left the labor market. At the same time, the number of people with jobs increased by only 40,000 in the third quarter of 2022.

Meanwhile, according to the final data of the German Federal Statistical Office, in August the level of consumer prices in the country soared by a record 8.8%. In monthly terms, prices increased by 0.4%. Recall that in July, this indicator increased by 8.5% year-on-year and by 0.8% month-on-month.

According to the data of the Spanish statistical agency INE, in the past month, inflation in the country fell to 10.5% from July's 10.7% amid falling rates of increase in the cost of transport services. In monthly terms, prices in the country rose by 0.3% after falling by 0.6% in July. At the same time, experts predicted a greater slowdown in consumer price growth in annual terms – up to 10.3%.