Europe’s STOXX 600 index was down for the seventh time in a row on Thursday, being dragged down by real estate and technology stocks, as investors focused exclusively upon U.S. inflation data due later on in the day, to assess the direction of Federal Reserve’s rate hike.
The index for the entire region dropped 0.5 percent at 0810 GMT and is on track to record the longest streak of losses since the beginning of February 2018 if losses persist.
The index has dropped nearly 4.3 percent in the past seven days, with investors be concerned by central banks’ ad hoc policy actions to curb the rising rate of inflation, as well as recently issued warnings by the International Monetary Fund and the World Bank about a recession.
Recent data have confirmed that German inflation harmonised was +10.9 percent y/y in September. In contrast, the consumer price index (CPI) within Sweden which is measured using an interest rate fixed increasing by 1.1 percent over August.
The focus is on U.S. CPI data due at 1230 GMT.
Minutes from the U.S. Fed’s most recent meeting indicated that many Fed official “emphasized the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action”.
“There is nervousness ahead of the U.S. CPI data, particularly given the Fed minutes yesterday showing policymakers are hyper focused on bringing down inflation with the warning higher rates will linger for longer,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.
The London’s FTSE 100 fell 0.5 percent on the back of increased fears about British Prime Liz Truss’s economic plan and the turmoil that it created that has forced to force the Bank of England to intervene.
With the third quarter earnings season approaching and investors now focusing on how the management of corporate Europe predicts earnings growth at a time where continent-wide inflation is at an all-time record-high and the possibility of a recession is being considered.
“The effects of inflation and expected economic contractions on shoppers caution are expected to continue to weigh on consumer discretionary stocks, particularly retail, travel and hospitality,” Streeter stated.
“Rising COVID rates in China show the pandemic isn’t fully in the rear view mirror and a fresh front breaking out in the U.S.-China ‘chip wars’ also risks fresh supply chain woes particularly for the tech and motor manufacturing sectors.”
European semiconductor companies were hit following the announcement by chip-making technology company Applied Materials Inc (NASDAQ: AMAT) stated that export restrictions to China could cause a $250-$550 billion loss in sales during the quarter ending October. 30. A similar impact anticipated over the next three months.
The shares of Infineon (OTC: IFNNY), ASML, ASMI, BESI and Aixtron fell between 1.2 percentage and 3.2 percentage
Aroundtown Aroundtown shares fell 6.3 percent after Citigroup (NYSE: C) downgraded the real estate firm’s stock down to “neutral” from “buy”.
British builder Taylor Wimpey (LON: TW) was down 5.2 percent when it traded its dividend ex-dividend.
Norwegian producer of aluminium Norsk Hydro (OTC: NHYDY) increased 5.6 percent after news of it was believed that the United States was weighing restricting imports of Russian aluminum.