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FX.co ★ Stock Europe drops sharply after three-day gains

Stock Europe drops sharply after three-day gains

At the auction on Thursday, the key stock indicators of Western Europe are steadily falling on the data on the decline in business activity in the countries of the euro region.

So, at the time of writing, the composite index of the leading companies in the STOXX Europe 600 dipped by 0.44% - up to 403.96 points.

At the same time, securities of the French IT company Atos SE (+10%) topped the list of rises in the STOXX Europe 600 components.

The lowest results here were shown by the shares of the Swedish energy company Lundin Energy AB (-98%).

The British FTSE 100 lost 0.69%, the French CAC 40 lost 1.09% and the German DAX lost 1.37%.

Stock Europe drops sharply after three-day gains

Italian Banca Monte dei Paschi di Siena SpA sank 1.5%. The day before, the bank's management announced that it plans to cut 4,000 employees and close dozens of branches as part of a business reorganization.

Luxembourg-based real estate company Aroundtown S.A. fell 7.8% after JPMorgan downgraded its recommendation on real estate stocks.

The key downside factor for stock Europe on Thursday was the latest macroeconomic statistics for the euro area. Thus, according to a preliminary assessment by S&P Global, in June the composite index of purchasing managers of 19 euroregion states sank to 54.8 points from 54.9 points in May, which was the lowest since February 2021. At the same time, market experts predicted a decline to 54 points.

In the outgoing month, the activity index in the eurozone services sector sank to 52.8 points from 56.1 points in May. The PMI indicator in the manufacturing industry of the currency bloc fell in June to 52 points from 54.6 points in May. The result was the lowest over the past 22 months.

Meanwhile, according to the National Institute of Statistics and Economic Studies of France Insee, this month the index of business confidence in the country's economy soared to 108 points against 106 points in May. Economists on average expected the index to fall to 105 points.

The consolidated German PMI fell to 51.3 in June from 53.7 in May. At the same time, analysts expected a decline only to 53.1 points. The PMI index in the German services sector fell to its lowest level since the beginning of the year - 52.4 points against 55 points in May.

Additional pressure on European stock markets was also exerted by the fact that on Thursday morning the Norwegian central bank raised the base interest rate by 50 basis points - up to 1.25% from 0.75% per annum. This tangible increase in the key rate was the highest since 2002. By the way, experts predicted an increase of only 25 basis points.

Serious fears of European investors are still associated with the tight monetary policy of the world's leading central banks, which could trigger a recession in the global economy.Traders' concerns are also shared by market experts. Recently, analysts at the Swiss economic institute KOF warned that in 2023 the United States and the eurozone countries could enter a recession.

The day before, as part of a speech before the banking committee of the US Senate, Federal Reserve Chairman Jerome Powell said that the central bank would continue to increase the key rate until the inflation rate in America approaches the target of 2%.

In addition, Powell said recession risks "are not particularly elevated at the moment" with the US economy strong and consumers and businesses "in good shape."

Trading results the day before

European stock indicators showed a decrease on Wednesday amid a collapse in world oil prices and a record 40-year inflation rate in the UK. Prior to this, stock Europe showed steady growth for three consecutive days.

As a result, the composite index of the leading European companies STOXX Europe 600 fell by 0.7% to 405.74 points.

At the same time, securities of the German steelmaker Voestalpine AG (+13.1%) topped the list of rises in the components of STOXX Europe 600.

Meanwhile, the UK FTSE 100 shed 0.88% to hit 7089.22, the French CAC 40 shed 0.81% to hit 5916.63 and the German DAX slipped 1.11% to hit 13144.28.

The day before, the oil market showed a spectacular decline, losing more than 3% per day. Against this background, the energy index in Europe fell by 3.3%, while securities of energy companies BP, Shell, TotalEnergies and Equinor fell by 3.1%, 3.5%, 2.9% and 4.9%, respectively.

Belgian electric vehicle component maker Umicore SA plunged 8%. The company presented a new development strategy, according to which by 2030 it plans to double its revenue compared to 4 billion euros at the end of the past year.

The market capitalization of the British developer of software for enterprises Micro Focus International collapsed by 16.2%. In the first financial half of the year, the company's pre-tax loss decreased to $42.9 million compared to $280 million a year earlier, and revenue decreased to $1.27 billion from $1.43 billion.

French bank Credit Agricole sank 1.6% on Wednesday. The company's management presented a development plan, according to which by 2025 Credit Agricole intends to attract 1 million new customers in the field of retail banking and increase net profit to 6 billion euros.

British retailer JD Sports Fashion Plc soared 6.6%. The company reported an increase in revenue in the past fiscal year to 8.56 billion pounds from 6.17 billion pounds. At the same time, the market, on average, expected an increase in the indicator to only 8.38 billion pounds.

The main factor of pressure for stock performance in Europe on Wednesday was data on annual inflation in the UK. According to the country's National Statistical Office, following the results of the past month, consumer price growth in England accelerated to a record 9.1% since 1982 from 9% in April.

The key catalyst for increasing the rate of inflation in the UK experts call the rise in prices for food and energy.

Meanwhile, domestic producer prices soared to their highest levels since 1977 in May as commodity prices surged. According to the UK Office for National Statistics, the PPI rose by 15.7% year-on-year after rising by 14.7% in April.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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