On Wednesday, key European stock indices declined dramatically amid the release of fresh statistics on the EU countries. At the same time, stock indexes have been actively rising over the last three sessions and closed Tuesday's trading with a record six-month gain.
By the time of writing, the STOXX Europe 600 index of Europe's leading companies had dropped by 0.9% to 399.40 points.
Meanwhile, the French CAC 40 fell by 0.73%, the German DAX lost 0.79%, and the British FTSE 100 declined by 1.15%.
Top gainers and losers
The stocks of British largest grocery retailer Tesco Plc advanced by 2.5% despite a 2.8-fold decline in pre-tax profits in the January-June fiscal year 2023. In addition, earlier, the company worsened its full-year outlook due to changing consumer behavior and continued uncertainty in the trading environment amid skyrocketing inflation.
The stocks of Finnish airline Finnair rose by 1.2%. Earlier, the company reported that it had carried 890,500 passengers in September, i.e. 1.1% more than in August. At the same time, the number of Finnair passengers totaled only 298,200 in September 2021.
The market capitalization of Danish manufacturer of audio systems and other electronics Bang & Olufsen A/S fell by 2.6%. The company's revenue dropped by 8.2% in the first fiscal quarter.
The stocks of Swedish Avanza Bank Holding declined by 6.4%.
The stocks of French auto parts supplier Faurecia SE were down 6.2%.
The stocks of Swedish cloud computing services provider Sinch AB soared by 9.7%.
Meanwhile, the market capitalization of Swedish airline SAS AB has been steadily rising. Earlier, the company's management announced about the changes in the contracts with 10 lessors providing 36 aircraft. According to the preliminary expectations of the SAS AB management, it will help to save about $700 million a year by 2026.
Market sentiment
On Wednesday, European investors focused on fresh statistics on the euro area. According to the final estimation of experts, in September the composite services and manufacturing PMI of 19 EU countries was 48.1 points down from 48.9 points in August. Meanwhile, earlier analysts forecasted that the index would decline to 48.2 points.
The final September PMI was the lowest in two years and eight months. Traditionally, the value of composite services and manufacturing PMI above 50 points indicates economic growth. In case it is below this level, it shows decline.
Moreover, on Wednesday S&P Global reported that the Eurozone Services Purchasing Managers' Index (PMI) was 48.8 points in September compared to 49.8 points in August. The September index was the lowest since February 2021. At the same time, analysts predicted a less significant decline in the index to 48.9 points. Besides, if Services Purchasing PMI drops below 50 points, it traditionally indicates a decline in business activity in the sector.
Meanwhile, Italy's Services PMI fell to 48.8 points in September from 50.5 points in August. In Germany, Services PMI sank to 45 points from 47.7 points. Meanwhile, in France the index rose to 52.9 points in September from 51.2 points in August.
Germany's foreign trade surplus decreased to 1.2 billion euros in August from 13.7 billion euros registered in 2021 and 3.4 billion euros in July. This considerable reduction in the country's trade surplus was a clear signal of a slowdown in external demand for goods produced by Germany's key manufacturing sector.
The volume of German exports in September, adjusted for calendar and seasonal factors, rose by 1.6% to €133.1 billion compared to August. Meanwhile, imports advanced by 3.4% to €131.9 billion.
Meanwhile, industrial production in France jumped by 2.4% in August compared to July's drop of 1.6%. At the same time, the August figure was the highest since January 2021.
Previous trading results
On Tuesday, European stock indices closed in the green zone, gaining nearly 4%.
The composite indicator of Europe's leading companies STOXX Europe 600 rose by 2.01% to 403.03 points. In addition, the index exceeded 400 points for the first time since September 22.
The French CAC 40 advanced by 4.24%, the German DAX gained 3.78% and the British FTSE 100 added 2.57%.
The stocks of German automobile concern Volkswagen rose by more than 1%. The day before, head of Volkswagen Oliver Blumet told local media that he planned to hold an IPO in all subsidiaries after the successful Porsche IPO.
Stocks of Swiss banking group Credit Suisse Group AG soared by 8.9%, recovering from a 9% collapse the day before. The bank management announced on Monday 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 British insurance company Legal & General Group advanced by 5.9% on the report of further support for pension fund clients affected by the sharp rise in interest rates.
The stocks of British bakery chain Greggs PLC added 10% due to total sales, which rose by 14.6% year-over-year during the past quarter.
The shares of Swiss vacuum equipment maker VAT Group AG gained 6.9%.
The stocks of French IT company Atos SE added 6.8%.
The market capitalization of online furniture retailer Made.Com surged by over 20% on news that its management had started talks with a number of interested parties for a potential sale of the company.
The shares of Swiss chemical group Sika AG jumped by 6% amid improvement in its revenue forecast for 2022.
The stocks of Spanish banks Santander, BBVA and Caixabank rose by more than 7%.
Quotes of British marketing company S4 Capital increased by 10%.
The market capitalization of Norwegian fish company SalMar ASA dropped by 10.3%.
On Tuesday, a successful outcome of the latest trading session on the US stock market became a major positive factor for European stock exchanges. Thus, The Dow Jones Industrial Average gained 2.7% in the first trading session of the fourth quarter, reaching a February high. Meanwhile, the S&P 500 Index rose by 2.59% and the NASDAQ Composite advanced by 2.27%.
In addition, Asian indices rose significantly the day before as the Hong Kong stock exchange opened after a holiday.
Experts believe that the previous surge of optimism in the European stock markets is due to the weakening of investors' concerns over the further aggressive monetary policy of world central banks. Analysts say that high recession risks for the global economy may force the regulators to pursue a more dovish policy.
According to the statistics published on Monday, US manufacturing PMI in September fell to its lowest level of May 2020. Investors considered this situation as confirmation that monetary tightening by the Federal Reserve began to reduce economic growth.
Meanwhile, the ISM Manufacturing index fell to 50.9 points last month from 52.8 points in August, according to data from the Institute for Supply Management (ISM). At the same time, analysts on average expected the index to fall only to 52.2 points.
