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Share Price: 357.30
Bid: 359.20
Ask: 360.00
Change: 6.20 (1.77%)
Spread: 0.80 (0.223%)
Open: 350.90
High: 366.20
Low: 349.40
Prev. Close: 351.10
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STOXX falls as inflation rears its head

Tue, 28th Feb 2023 09:14

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STOXX FALLS AS INFLATION REARS ITS HEAD(0908 GMT)

Europe's STOXX 600 is flashing red this morning, dropping 0.3% and weighed down by a raft of less-than-stellar results combined with resurfacing inflation worries.

Just before the open, data showed the 12-month inflation rate in France rose to 7.2% in February from 7.0% in January. Minutes later, Spanish CPI came in above analysts' expectations.

With inflation fears at the forefront, the market is forced to consider rates staying higher for longer, and banks are unsurprisingly faring well.

The STOXX banks index is up 0.5%, while euro zone specific banks are rising 0.7%, bucking the wider sell-off.

Results have been a mixed bag. The STOXX 600's biggest riser is Aixtron - shares are soaring 10% after the German chip equipment maker beat estimates for 2023.

Meanwhile, UK online supermarket Ocado's shares are the worst performers, down 10% after flagging rising costs and tighter customer purse strings in its annual results.

Construction and materials names are proving the biggest drag on a sector basis, falling 1% and weighed down by shares in Danish wool product manufacturer, down 7.1%.

Spain's Acciona is not helping the sector, with shares down 4.2% after full year results.

(Lucy Raitano)

FUTURES FALTER AHEAD OF FRANCE, SPAIN CPIs(0734 GMT)

Futures are hinting at a lower open for Europe, with Eurostoxx 50 futures down 0.3%% while UK FTSE futures are down 0.13%.

Despite the gloom, as of yesterday the STOXX 600 is still on track to add over 2% this month, taking its 2023 gain to 8.7%.

On Monday, the index almost pared Friday's losses that were driven by heightened expectations of more Federal Reserve interest rate hikes.

Speaking of inflation, traders will have French inflation and GDP figures to crunch as well as Spanish and Portugese February flash CPIs ahead of the market open today.

News on Monday that British Prime Minister Rishi Sunak struck a deal with the EU on post-Brexit trade rules for Northern Ireland had little impact on UK equities, but was supportive of the pound.

In company news, Swiss financial watchdog FINMA concluded on Tuesday that Credit Suisse "seriously breached its supervisory obligations" in connection with its business relationship with financier Lex Greensill and his companies.

(Lucy Raitano)

MARKET MOOD DOWNBEAT AHEAD OF RAFT OF DATA (0712 GMT)

The overarching downbeat mood among investors shows no signs of improving as markets become increasingly wary of a further rise in borrowing costs.

Although U.S. markets took a breather and rose on Monday, they ended well below the day's highs and Asian markets were back in the red on Tuesday after gaining in early trade.

Tuesday's U.S. consumer confidence data will be especially scrutinised for households' views on economic prospects and inflation expectations.

Economists polled by Reuters expect a median reading of 109.5 on the index, which unexpectedly fell in January.

European markets will deal with CPI data due from France and Spain.

Despite sharp increases in interest rates by major central banks, predictions of economies worldwide falling into recession continue to miss the mark.

While inflation has eased a bit, providing some support to markets, a barrage of economic data suggests that inflation is stickier than expected, reinforcing the "higher-for-longer" rates view.

On Tuesday, sterling gave up some gains after rising by 0.98% against the dollar a day earlier, when it recorded its biggest daily gain in more than seven weeks.

British Prime Minister Rishi Sunak struck a deal with the European Union on post-Brexit trade rules for Northern Ireland.

Sunak immediately won plaudits from business groups who welcomed the easing of trade rules.

The news comes at a time when Britain's economy, which looked likely to fall into recession in early 2023, is showing some unexpected signs of recovery, raising questions about whether the Bank of England really is about to pause its run of interest rate increases.

In Asia, incoming Bank of Japan Deputy Governor Shinichi Uchida brushed aside the chance of an immediate overhaul of ultra-loose monetary policy, suggesting that any review of its policy framework could take about a year.

Elsewhere, data showed that Japan's factory output shrank at the fastest pace in eight months in January as declining overseas demand took a heavy toll on key industries.

Key developments that could influence markets on Tuesday:

Europe economic data: France Feb prelim CPI, final Q4 GDP; Spain, Portugal Feb flash CPI; Germany Jan import prices

Europe results: Man, Abrdn, Ocado, Travis Perkins

U.S. economic data: Dec house price data, Feb Chicago PMI

U.S. earnings: Target Corp, Jones Lang LaSalle, Manchester United

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