FX.co ★ European stocks decline dramatically in early October

On Monday, key European stock indices dropped by over 1% as statistical data on the EU countries were published. Moreover, investors continue to discuss skyrocketing inflation and permanently rising interest rates in the world's largest economies.

At the time of writing, the STOXX Europe 600 index of Europe's leading companies fell by 1.37% to 382.54 points.

Additionally, the STOXX Europe 600 index has decreased by 4.7% and closed in negative territory for the third quarter in a row since early July. At the same time, the key stock index has seen the longest decline since 2011.

Meanwhile, the French CAC 40 lost 1.55%, the German DAX dropped by 1.37%, and the British FTSE 100 sank by 1.34%.

The FTSE 100 has fallen by 3.4%, the CAC 40 also has declined by 3.4%, and the DAX has been down 5.5% since early July.

Top gainers and losers

On Monday, the shares of Swiss banking group Credit Suisse Group AG plummeted to a historic low of 3.52 Swiss francs per unit. The stocks have already lost 9% since the start of trading. The bank management announced that they were considering the possibility of cutting 1,000 jobs for the next few years as part of a new anti-crisis program. This step exerted key pressure on the Credit Suisse quotes. The business reorganization plan will be unveiled at the end of October.

The market capitalization of French construction company Vinci fell by 0.8% despite the fact that it had recently announced the receipt of two contracts for the construction of power lines in Brazil worth 1.06 billion euros.

The shares of British energy giant Genel Energy soared by 3.9% after the company's management reported that Paul Weir had been appointed new CEO. Wair has fulfilled the interim role since June 2022.

Stocks of Swedish-Swiss electrical equipment manufacturer ABB Ltd. plummeted by 7%. The day before, the company's management said it had completed the process of spinning off its turbocharger division Accelleron into a separate entity.

Shares of Danske Bank, Denmark's largest commercial bank, fell by 8%.

Market capitalization of Danish salmon producer Bakkafrost soared by 8.3%.

Stocks of Swedish oil and gas company Orron Energy rose by 6.6%.

Shares of Norwegian oil exploration and development company Aker BP ASA advanced by 5.5%.

Market sentiment

On Monday, investors focused on fresh statistics on ISM manufacturing PMI of 19 EU countries. According to the final S&P estimate, the index fell to 48.4 points in September from 49.6 points in August. At the same time, the September PMI was the lowest in two years and three months. Moreover, analysts forecasted that the index would fall only to 48.5 points.

In September, Germany's manufacturing PMI fell to 47.8 points from 49.1 points in August. In France, this indicator fell to 47.7 in September from the previous 50.6 points. Meanwhile, the same indicator in Italy increased to 48.3 points in September from 48 points in August.

On Monday, alarming news came from the UK. The country's new finance minister Kwasi Kwarteng announced that he was abandoning his plans to slash the top income tax rate. In response to this, the British pound as well as bonds collapsed sharply.

Notably, the UK currency paired with the US dollar renewed its historic low last week. Meanwhile, during trading 10-year British government bond yields climbed to the high of 4.246% since 2008. The reason for such anti-records was expectation of tax cuts in the UK.

At the end of September, Kwasi Kwarteng announced a significant tax cut in addition to measures to provide large-scale support for households to pay their energy bills. This will affect individuals and businesses and increase the budget deficit by more than 70 billion pounds in fiscal year 2022.

Last weekend, UK Prime Minister Liz Truss tried to defend her fiscal package of unfunded tax cuts in the country. However, several members in the Conservative Party opposed the move.

Moreover, Russian energy giant Gazprom suspended gas deliveries to Italy. Later, the representatives of Italy's oil and gas company Eni said they expected the suspension of gas supplies from Russia to last until Monday.

Last Thursday, mass media reported that Sweden's coastguard discovered a fourth gas leak in the damaged Nord Stream pipeline.

EU officials suspect sabotage is the reason for the leaks at Russian pipelines. Earlier, the EU promised a robust response to any deliberate disruption of energy infrastructure.

At the same time, Russian energy giant Gazprom said on Tuesday that it would seek to have Ukrainian gas pipeline operator Naftogaz Ukraine added to the list of entities against which Russia had imposed sanctions. Analysts predict that this will lead to the termination of almost all remaining gas supplies to the EU countries.

In recent months, the prospects of declining energy supplies to Europe are one of the key reasons for the deepening economic crisis in the euro area.

Previous trading results

On Friday, European stock indices closed in the green zone. The main reason for positive market sentiment was analysts' improving forecast of British economic growth.

Consequently, the STOXX Europe 600 index of Europe's leading companies soared by 1.3% to 387.85 points.

The French CAC 40 gained 1.51%, the German DAX rose by 1.16%, and the British FTSE 100 added 0.18%.

The shares of British producer of luxury sports cars Aston Martin declined by 3.9%. Earlier, the news broke that Chinese automobile company Zhejiang Geely Holding Group had bought 7.6% of shares of Aston Martin.

Stocks of producers of sporting goods Puma and Adidas fell by 5.7% and 4.1% respectively. The day before, their US rival Nike Inc. reported a decline in quarterly profits and noted the impact of negative factors on profitability.

The market capitalization of Italian construction company Webuild advanced by 5.5% on the publication of an optimistic annual forecast.

The shares of French financial conglomerate Societe Generale rose by 1.4%. On Friday, news came that Slavomir Krupa would be appointed the bank's new CEO. Krupa currently heads the investment banking division.

Stocks of Swiss engineering company ABB Ltd. jumped by 1.8% after the news broke that Japanese electrical equipment maker Hitachi Ltd had purchased a 19.9% stake in JV Hitachi Energy.

On Friday, European investors were assessing fresh statistical data from EU countries.

The day before, the UK National Bureau of Statistics unexpectedly raised the estimate of GDP annual growth in the second quarter to 4.4% from 2.9%. At the same time, the UK economy rose by 0.2% in April-June 2022 compared with the previous three months. Earlier, the agency said that UK GDP fell by 0.1% during this period .

In September, consumer prices in France unexpectedly rose by 6.2% in annual terms and by 6.6% month-on-month.

In August, consumer spending in France did not change against the July indicator. Meanwhile, experts forecasted that the index would decline by 0.1%.

As for Germany's statistics, the number of unemployed people rose by 14,000 last month. The September increase was the fourth consecutive monthly rise, while the unemployment rate was expected to remain at 5.5%.

Italy's unemployment rate unexpectedly plunged to 7.8% in August from 7.9% in July, although market makers did not forecast any change in the figure.

Earlier, speaking at an event in Frankfurt, European Central Bank President Christine Lagarde said the regulator intended to raise interest rates at the next few meetings.

Analysts predict that the ECB will raise interest rates by another 75 basis points during the October and December meetings.

Notably, earlier at its September meeting, the European Central Bank raised the main base rate on loans to 1.25%, the rate on deposits to 0.75%, and the rate on marginal loans to 1.5%. At the same time, the discount rate was increased immediately by 0.75% for the first time in history.