European stocks experienced a significant downturn on Wednesday, with several markets plummeting to multi-week lows. This decline occurred amid growing concerns about the Federal Reserve's interest rate policies, particularly in anticipation of critical inflation data, including U.S. income and spending reports.
Rising bond yields and increasing oil prices, fueled by escalating Middle Eastern tensions, heightened fears that interest rates might remain elevated for an extended period. Recent hawkish comments from several Federal Reserve officials further contributed to investor unease.
The pan-European Stoxx 600 fell by 1.08%. The UK's FTSE 100 decreased by 0.86%, Germany's DAX dropped by 1.1%, and France's CAC 40 declined by 1.52%. Switzerland's SMI also ended the day down by 0.51%.
In addition to these, markets in Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and Turkey all saw notable declines. Russia, however, diverged from this trend and posted modest gains.
In the UK, National Grid shares dropped nearly 21%, while Ocado Group fell by 12.25%. Other notable declines included RS Group, Entain, Mondi, WPP, Barratt Developments, Barclays Group, Melrose Industries, and Reckitt Benckiser, with losses ranging from 2% to 4.5%.
Anglo American PLC shares saw a significant decline as the company dismissed BHP's proposal for additional time to deliberate on the £39 billion mining sector mega-merger. Conversely, Fresnillo shares rose nearly 2% following an upgrade from RBC Capital Markets. Beazley climbed around 1.3%, and Next ended the day up by 1.1%. Other gainers included Associated British Foods, United Utilities, B&M European Value Retail, Shell, and Admiral Group.
In Germany, Siemens Energy dipped nearly 4%, with Infineon, Bayer, Sartorius, Porsche, Fresenius Medical Care, RWE, Vonovia, Continental, Commerzbank, BMW, Volkswagen, and BASF all losing between 2% and 3.1%. Conversely, Adidas gained over 2%, with Merck and Hannover Rueck posting modest gains.
In France, Crédit Agricole plunged by more than 7%. Other significant decliners included Edenred, Capgemini, ArcelorMittal, LVMH, Publicis Groupe, Pernod Ricard, STMicroelectronics, Kering, Teleperformance, Schneider Electric, and Accor, all falling between 2% and 4.3%. On a positive note, Michelin made slight gains, while Renault surged approximately 3.2% following an upgrade from Goldman Sachs, which adjusted the stock's rating from "neutral" to "buy."
Economically, Germany's consumer price inflation accelerated in May, with core inflation remaining stable, signaling persistent inflationary pressures that might complicate the European Central Bank's upcoming interest rate decisions. The harmonized index of consumer prices (HICP) rose to 2.8% from April's 2.4%.
German consumer confidence appears set to improve further in June, buoyed by rising economic and income expectations amid slowing inflation and increasing wages, according to a survey by GfK and the Nuremberg Institute for Market Decisions. The consumer confidence index improved to -20.9 in June from a revised -24.0 in May, marking the fourth consecutive month of improvement.
Meanwhile, French consumer confidence remained unchanged in May, still considerably below its long-term average. The consumer sentiment index held steady at 90.0, contrary to economists' expectations of a rise to 91.
On the monetary front, Eurozone private sector credit growth remained weak, though money supply experienced its fastest growth in a year in April, as reported by the European Central Bank. However, the pace of expansion remained subdued, with private sector claims increasing by 0.7% annually, a slight decrease from March's 0.8%. In contrast, adjusted loans to the private sector exhibited a marginally faster growth rate of 0.9%.
