November 30, 2023


European shares fell on Wednesday after investors digested glum inflation figures and their impact on the upcoming earnings seasons ahead of a key European Central Bank meeting. Meanwhile, commodity-linked sectors saw a rise in supply worries.

The pan-European STOXX 600 index was flat. Retail stocks (.SXRP), and defensives like real estate (.SX86P), fell between 0.2% to 0.6%. Oil (.SXEP), and mining (.SXPP), shares rose.

“Investors look for companies that can thrive in an inflationary climate, such as miners, when they see high inflation numbers,” explained Danni Hewson of AJ Bell, financial analyst.

After Moscow declared that peace talks with Ukraine have ended in a deadlock, the oil prices saw a rise in crude oil prices. This fueled fears about tight supply.

According to data from the central banking, a gauge of long-term inflation expectations for the euro zone rose to above 2.40%. This is a peak in 10 years and well above the ECB’s 2% target. The policy meeting will be held on Thursday.

European stocks lack direction, with the meeting likely setting the tone for weeks to follow, according to Raffi Boyadjian (lead investment analyst at brokerage XM).

“The ECB will decide if they will provide a time frame for when interest rates will rise amid soaring costs, but even if they adopt a slightly more hawkish stance that was anticipated, they will not be able match the Fed’s rhetoric.”

Although no major policy decision is expected Thursday, the money markets anticipate around 70 basis points of tightening in December. Global markets have been rattled by investor concerns about rising rates in recent sessions.

The STOXX 600 has seen a recovery from its March losses, but is trading within a narrow range in the lead up to the first quarter earnings season.

Britain’s largest retailer Tesco (TSCO.L), dropped 2.0% following warnings of a fall in profits due to rising inflation.

Wall Street bank JPMorgan Chase & Co.’s (JPM.N.) first quarter profit fell 42% due to slowing dealmaking and rising credit losses.

Analysts expect STOXX 600 companies’ profit to increase 25.1% in the quarter. This is up from the 20.8% and 15% seen at the beginning of April.

EDF (EDF.PA) advanced 2.4% following a report that France is looking at restructuring plans for its debt-laden power company. These plans include full nationalisation and the sale of its renewables businesses.

Telecom Italia (TLIT.MI) gained 3.0% following reports that Iliad, a French telecoms group, was interested in making an offering for TIM’s domestic service business.


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