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flag ★ European stocks mixed ahead of US news

Analysis News:::2022-09-21T20:41:38

European stocks mixed ahead of US news

On Wednesday, key European stock indices traded mixed. Market participants awaited the US Federal Reserve's monetary policy decisions.

At the time of writing, the STOXX Europe 600 index of Europe's leading companies rose by 0.38% to 404.94 points.

Meanwhile, the French CAC 40 sank by 0.05%, the German DAX dropped by 0.17%, and the British FTSE 100 gained 0.59%.

European stocks mixed ahead of US news

Top gainers and losers

Shares of German energy company Uniper SE dropped by 22% due to the news that its management continued to discuss with the German government a possibility of increasing the state's stake in the company which might result in its full nationalization in the future.

Stocks of another German energy company EON gained 0.7%. Earlier, a press release from EON stated that the contract with the company's CEO Leonard Birnbaum was extended until June 30, 2028.

The market capitalization of French power engineering company Schneider Electric dropped by 0.3% and that of British software developer Aveva increased by 2.3%. Earlier, Aveva shareholders approved the sale of Schneider for $10.8 billion.

The shares of British bank Lloyds rose by 0.4%, while stocks of French Societe Generale and Swiss UBS sank by more than 1.5%.

The shares of Finnish energy giant Fortum Oyj soared by 14%.

Market sentiment

On Wednesday, investors awaited the outcomes of the Federal Reserve System's September meeting. They are scheduled to be published today.

During the two-day meeting, the regulator carefully assessed the final August inflation figure. Analysts are confident that the central bank will again raise the rate by 75 basis points amid a slight decline in the Consumer Price Index. Last week, US Federal Reserve Chairman Jerome Powell said the regulator was prepared to act decisively to fight soaring consumer prices in the country.

Currently, about 82% of market makers believe that the US Federal Reserve will raise the benchmark interest rate by 75 basis points. At the same time, 18% predict a likely 100 basis point rate hike. Consequently, the interest rate could be increased to 300-325 or 325-350 basis points respectively.

Moreover, on Wednesday the US Federal Reserve revised its quarterly economic forecasts, which could give investors an idea about the future prospects of the interest rate amid the permanently rising inflation rate.

Notably, the US central bank already raised its key rate by 25 basis points in March 2022, by 50 and 75 basis points in May and June respectively.

On Wednesday, the weak results of the latest US trading session exerted pressure on the European stock market. On Tuesday, the Dow Jones Industrial Average index sank by 1.01%, the S&P 500 index lost 1.13%, and the NASDAQ Composite fell by 0.95%.

This week, participants of the global stock markets will also actively follow the Bank of England meeting. Most analysts believe the British regulator will raise the rate by another 75 basis points to combat skyrocketing inflation.

In the next meeting, the Bank of England will have to adjust its next steps in monetary policy according to the measures of Liz Truss's new cabinet to limit energy prices.

Notably, the Bank of England representatives predicted during the August meeting that inflation in the country would peak at 13.3% by the end of 2022. Then the UK will plunge into recession and it will not end until early 2024.

Moreover, monetary policy meetings of the central banks of Switzerland, Norway, Sweden, Japan, Turkey, and China are scheduled for this week.

The day before, the news came that the People's Bank of China had lowered the repo rate and also increased monetary injections into its economy. Lately, the regulator has been trying to stimulate the growth of China's economy. It has been hit hard by lockdowns and restrictions caused by the coronavirus pandemic.

On Friday, fresh data on the EU and UK PMIs will be released.

Over the past two months, the eurozone PMI has been hovering below 50, which is the line between contraction and expansion. At the same time, the risk of recession in the EU economy has reached its all-time high since July 2020.

Previous trading results

On Tuesday, European stock indices closed mostly in the red zone.

Consequently, the STOXX Europe 600 index of Europe's leading companies fell by 1.09% to 403.52 points.

The French CAC 40 sank by 1.35%, the German DAX decreased by 1.03%, and the British FTSE 100 gained 0.64%.

Stocks of German chemicals company Henkel AG dropped by 1.2% despite its better 2022 sales forecast due to promising results from its Adhesive Technologies business unit.

Shares of British home improvement retailer Kingfisher plunged by 3.9%. Earlier, the company's management reported a 30% decline in pre-tax profits in the first half of fiscal 2023 amid record high inflation in the country and rising commodity prices.

The market capitalization of UK-based mobile payments group Boku Inc. soared by 15%. Earlier, the company said it had signed a multi-year commercial agreement with US Inc.

The shares of German tour operator TUI AG rose by 1.4% despite the news about the company's high costs due to flight cancellations.

The stocks of British Petroleum and Shell rose by more than 1%.

Shares of Italian bank Unicredit advanced by 1.8%. CEO Andrea Orsel recently told the media that Unicredit was considering a number of acquisitions in Germany as part of a plan to become a fully-fledged European bank.

The market capitalization of Swiss biotech supplier Bachem Holding jumped by 9% on the news that two new contracts for peptide delivery had been signed.

On Tuesday, the latest data on Germany became the key downward factor for European exchanges. According to the Federal Statistical Office of Germany Destatis, by the end of August the producer price index in the country soared by 45.8% in annual terms after rising by 37.2% in July. The final figure was a record high. Producer prices in Germany rose by 7.9% in monthly terms after growing by 5.3% in July. The monthly rise in the index was also a record high. Experts believe that the main reason for such a dramatic increase in the producer price index in August is soaring energy prices. Last month, they skyrocketed by 139% in annual terms.

Analyst InstaForex
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