FX.co ★ European stock market continues to rise on the never-ending euphoria of investors

On Friday, the leading stock indicators of Western Europe show an active increase following the key indicators of the US and Asian stock markets. Investors evaluate the final data on the level of consumer prices in America. In addition, market participants continue to analyze corporate earnings reports for the third quarter of 2022 from key companies in Europe, as well as fresh macroeconomic statistics for the region.

Thus, at the time of writing, the composite index of the leading European companies STOXX Europe 600 increased by 0.33% to 433.32 points.

The French CAC 40 rose 1.16%, the UK FTSE 100 gained 0.24% and the German DAX gained 0.76%.

Rising and falling leaders

Dutch packaging maker Vopak NV soared 17%. The day before, the company reported strong financial results for the third quarter, and raised its full-year forecast.

Quotes of the French service company Edenred collapsed by 5.7%.

The market capitalization of the British pharmaceutical giant GSK fell by 4.6%.

The share price of the world's largest jewelry maker Compagnie Financiere Richemont SA jumped 12%. In the first financial half of the year, the company increased revenue and operating profit stronger than market expectations.

Daimler Truck Holding AG, a German truck manufacturer, rose 0.2%. In July-September, the company increased revenue by 47% due to sales growth of 27%. The key reason for Daimler Truck's financial success was the easing of the microchip shortage that hit heavy truck production last year.

Quotes of the Italian bank Banca Monte dei Paschi di Siena SpA jumped 1.6%. The company reported a net loss in the third quarter, but announced the successful completion of an additional issue of shares in the amount of 2.5 billion euros.

The market capitalization of the French financial conglomerate Credit Agricole increased by 0.7%. The day before, the bank announced the launch of a buyback program for up to 16.7 million securities.

On Friday, stock prices of luxury goods companies, in particular LVMH, Kering and Hermes International, rose significantly amid an easing of anti-COVID restrictions by the Chinese government. Traditionally, China has been considered an important European export market for this kind of product.

The day before, Chinese state media reported that the quarantine time for tourists arriving in the country was reduced by 2 days to 5 days. The market hopes that this decision by the Chinese authorities will be the first step towards further easing restrictions on movement in the country. Recall that during 2022, outbreaks of coronavirus in a number of Chinese cities, including the major financial centers of Shanghai and Guangzhou, significantly limited economic activity in the world's second largest economy.

Market sentiment

In addition to studying the quarterly reports of the leading companies in the region, on Friday, European investors analyze the long-awaited news from the United States. Thus, data on consumer prices in the country were published the night before. As a result of the past month, annual inflation in America slowed down sharply - to 7.7% (the lowest since January) from 8.2% in September. At the same time, experts predicted that by the end of October, the consumer price index in the United States would drop to only 8% (the lowest since February).

The final data caused a wave of optimism in the US stock market, later the baton was taken over by Asian stock exchanges. So, according to the results of trading on Thursday, The Dow Jones Industrial Average rose by 2.33%, the S&P 500 index increased by 3.79%, and the NASDAQ Composite soared by 5.03%.

In addition, investors hope that the final data on inflation in America will become a decisive argument in the issue of the further course of monetary policy for the US Federal Reserve, which is closely watched by other central banks of the world. Thus, according to the largest North American financial derivatives market CME Group, in December 80.6% of experts expect a rate hike by 50 basis points, and 19.4% by 75 basis points.

On Tuesday, America began voting in the midterm congressional elections. Analysts and market participants suggest that the Republicans may gain control of the House of Representatives. At the same time, the battle for the majority in the Senate continues with approximately equal chances of victory for both parties.

It is assumed that the Republicans gaining control of the House of Representatives may provoke a decrease in budget spending and easing of the regulation previously adopted by the Democratic Party.

At the moment, the counting of votes following the results of the elections continues in America, the final result may become known in a few weeks. At the same time, experts are confident that the key to control over the Senate will be the struggle in the states of Arizona and Nevada.

In addition to news from the United States, on Friday, European traders also analyze statistical data from the countries of the region. Thus, according to preliminary estimates of the National Statistical Office (ONS), in the third quarter, the country's gross domestic product sank by 0.2% compared to the previous three months, showing a fall for the first time in a year and a half. At the same time, analysts had expected a decline of 0.5%. The UK economy is currently 0.4% below pre-pandemic levels.

Last week, representatives of the Bank of England warned that the country had already entered a recession that could last about two years.

Meanwhile, according to the final data of the country's Federal Statistical Office (Destatis), the level of consumer prices in Germany in October jumped in annual terms by 11.6%, which became a new historical record. In monthly terms, this figure increased by 1.1%.

Trading results the day before

On Thursday, the leading exchange indicators of Western Europe closed in the green zone amid investors' reaction to the October inflation data in the United States.

As a result, the composite index of leading European companies STOXX Europe 600 grew by 2.75% to 431.89 points.

The French CAC 40 rose 1.96%, the UK FTSE 100 gained 1.19% and the German DAX gained 3.51%.

The value of securities of the French outsourcing company Teleperformance SE collapsed by 34%.

Quotes of the German telecommunications company Deutsche Telekom AG sank 1.5%. At the same time, in the third quarter of fiscal year 2022, Deutsche Telekom increased its net profit by 1.8 times and improved its annual forecast for the third time since the beginning of the year.

The market capitalization of the French banking group Credit Agricole Group decreased by 2.5%. The day before, the bank reported a slight decrease in net profit and revenue in July-September 2022 amid a permanently growing volatility in financial markets.

The share price of the German company Knorr-Bremse AG, which specializes in the production of brake systems for trucks and commercial vehicles, soared by 12%. In the past quarter, the company increased its revenue and confirmed its full-year forecast.

German delivery service Delivery Hero SE rose 18.6% on the back of an updated full-year financial guidance.

Quotes of the German energy company RWE AG rose by 2.9%. In the past 9 months of 2022, the company has doubled its net profit on the back of the rapid development of operations in the field of renewable energy.

The market capitalization of Luxembourg-based steelmaker ArcelorMittal sank 0.5% on a report that its third-quarter earnings fell on the back of high energy prices and weakening demand.

British-Swedish pharmaceutical giant AstraZeneca jumped 1.4% on higher full-year earnings guidance.

Haleon, a British multinational medical products company, rose 0.9% on higher sales guidance.

Quotes of the Swiss insurance company Zurich Insurance fell by 1.2% The day before, the insurer announced that it would receive $550 million in net damage before taxes from Hurricane Ian.