Stock Market

European Stock Market Shows Mixed Performance as Weak UK Economy Dampens Positive Sentiment

European stock markets had a mixed day on Thursday as investors processed the disappointing U.S. inflation data and weak U.K. growth numbers, which diluted the positive sentiment.

Around 03:25 ET (07:25 GMT), Germany’s DAX index saw a slight dip of 0.1%, while the FTSE 100 in the U.K. also slipped 0.1%. However, the CAC 40 in France managed to climb 0.1%.

Yesterday, the major European stock indices experienced notable gains, thanks to lower-than-expected consumer inflation data from the U.S. This gave rise to hopes that the Federal Reserve’s anticipated interest rate hike in July could be the final move in this tightening phase.

Nevertheless, Thursday brought a measure of deflation to that optimism. Data revealed that the U.K. economy contracted by 0.1% in May due to strikes and an additional bank holiday to commemorate the coronation of King Charles. Although this decline was less severe than the anticipated 0.3%, the Bank of England is still expected to continue with its monetary policy tightening, especially with inflation at the highest level among G7 countries. Consequently, it may become challenging to avoid a recession in the latter half of the year.

Adding to the prevailing unease, China’s trade figures disappointed earlier on Thursday. The data indicated that the country’s exports had shrunk by 12.4% on a yearly basis in June, marking the worst decline since March 2020, the peak of the COVID-19 pandemic. Additionally, imports fell by 6.8% in June, representing the sharpest contraction since March this year—a considerably deeper decline compared to May’s 4.5% drop. These numbers underscore the struggles faced by China’s reopened economy, which, in turn, negatively impacts many major European exporting companies.

Furthermore, Barry Callebaut (SIX:BARN), the world’s largest chocolate manufacturer, experienced a 1.7% drop in its stock as it reported lower sales volumes over the past nine months. The decline can be attributed to reduced customer demand in an inflationary environment.

While oil prices saw a slight increase on Thursday, remaining near three-month highs, it was primarily due to the soft U.S. inflation data and robust Chinese monthly oil imports. China’s crude imports in June surged by over 45% compared to the previous year, reaching their second-highest monthly figure on record. This development instills hope for a recovery in the world’s second-largest economy and the largest crude importer.

However, gains were limited by an unexpected increase in U.S. oil inventories. According to the Energy Information Administration, stocks grew by 5.95 million barrels during the week ending July 7, significantly surpassing predictions.

As of 03:25 ET, U.S. crude futures were up 0.2% at $75.90 per barrel, while the Brent contract climbed 0.3% to $80.34.

In addition, gold futures experienced a 0.2% rise, reaching $1,965.10 per ounce, and the EUR/USD pair traded 0.1% higher at 1.1141.

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