Stock Market

European equities dip as banking sector concerns persist

On Wednesday, European stock markets saw a dip as concerns about the health of the global banking system weighed heavily during the ongoing earnings season. The DAX index in Germany traded 1% lower, the CAC 40 in France dropped 1.1%, and the FTSE 100 in the U.K. fell 0.6% at 03:55 ET (07:55 GMT). Although Standard Chartered (LON:STAN) posted a 21% rise in pretax profit, beating estimates and boosting its stock by 0.5%, the banking sector, as a whole, traded in the red after disappointing quarterly earnings results from Swiss lender UBS (SIX:UBSG) and Spain’s Santander (BME:SAN), the second-largest lender in the eurozone by market value.

Adding to the banking sector’s woes, the Swiss financial regulator FINMA raised concerns about the crisis plans of Zuercher Kantonalbank and PostFinance, calling their emergency blueprints insufficient. Meanwhile, First Republic Bank (NYSE:FRC) saw its stock slump after revealing $100 billion in customer withdrawals last month, raising concerns for the entire U.S. regional banking sector.

Away from the financial sector, Danone (EPA:DANO) saw a 0.8% rise in stock after raising its 2023 sales growth outlook upon reporting higher-than-expected first-quarter revenue. However, GSK (LON:GSK) saw a 0.6% fall in stock after announcing that it expected adjusted operating profit growth to be lower in the first half of the year due to increased costs for expected drug launches, despite reaffirming its 2023 guidance. Similarly, Puma (ETR:PUMG) saw a 2.7% drop in stock after reporting that it expected second-quarter sales growth at a low- to mid-single-digit percentage rate, below its full-year target, citing high inventory levels and ongoing market challenges. Roche (SIX:RO) also saw a 1.4% drop in stock after reporting a 7% fall in first-quarter sales due to a decline in demand for its COVID-19 therapies and diagnostic kits.

On a positive note, equity markets received a boost overnight from first-quarter results of U.S. tech giants Microsoft (NASDAQ:MSFT) and Google owner Alphabet (NASDAQ:GOOGL), beating market expectations upon release after the closing bell on Wall Street.

In economic news, the forward-looking German GfK consumer sentiment index saw an improvement to -25.7 for May, the seventh rise in a row from the revised prior reading of -29.3. Additionally, a number of ECB policymakers, including Andrea Enria, Kerstin af Jochnick, and Luis De Guindos, are scheduled to speak later in the session and could offer clues as to the future path of the central bank’s monetary policy. The European Central Bank is widely expected to increase interest rates again in early May, with the main open question being the size of the move, a quarter- or half-point step.

Lastly, oil prices stabilized on Wednesday after the previous session’s sharp losses, helped by falling U.S. fuel inventories that suggest resilient demand in the world’s largest oil consumer. U.S. crude futures traded 0.2% higher at $77.21 a barrel by 03:55 ET, while the Brent contract edged higher to $80.62. Additionally, gold futures saw a 0.2% rise to $2,008.40/oz, and EUR/USD traded 0.4% higher at 1.1019.

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