March 23, 2023

European Shares Climb On Luxury And Aero Stocks Boost

On Tuesday, European shares climbed, thanks to a boost in beaten-down aerospace, travel, and luxury stocks. But, gains in the stock market remained capped because of the worries over a crunch in energy supplies, along with the possibility of a global economic recession.

Stock indexes rise

The continent-wide STOXX 600 index recorded a gain of 0.5%, after it had opened lower and the previous session had seen it put an end to its three-day winning streak. There was a 1.1% and 2.8% gain in LVMH and L’Oreal, respectively, while France’s CAC 40 index climbed up by 0.8% due to a 3.9% rise in planemaker Airbus.

There was a 1.6% advancement in leisure and travel stocks after crude prices came down to below $100 a barrel because of rising concerns about a global slowdown in the economy. Meanwhile, there are increasing worries that an annual maintenance shutdown of the Nord Stream 1 gas pipeline that transports gas to Germany from Russia could be extended because of the Ukraine conflict. This would affect the gas supplies of the region.

Investors are concerned that Vladimir Putin, the Russian president, could decide to weaponize gas supplies in retaliation for the sanctions that have been imposed against the Russian Federation. These had been imposed after Russia sent its military troops into Ukraine back on February 24th. This could get a lot worse and while people are expecting it, this does not mean they have already priced it in.

Data shows impact

The data released on Tuesday morning showed that investor sentiment in Germany plunged to reach levels that were lower than even when the coronavirus had first hit. This was primarily because of supply bottlenecks, the possibility of an energy crisis, and the upcoming hike in the interest rate by the European Central Bank (ECB).

The ECB is significantly behind the US Fed and plenty of other central banks when it comes to tightening its monetary policy. However, it is expected to hike up the interest rates by 25 basis points in its policy meeting scheduled for the end of the month. However, a number of money markets have been scaling back their bets on how much rates would be raised by the ECB this year because of recession worries.

Individual stocks

There was a 6% jump in power giant EDF after sources disclosed that the French government wanted to bring the company under the control of the state and was ready to pay 8 billion euros for it. There was a 48.6% decline in Italy’s Sapiem, after the energy services company disclosed that only 70% of the new shares offered had been subscribed by investors.

There was a 0.6% fall in the Spanish IBEX 35 index, as banks brought it down. This was because of the announcement of the Spanish government to impose extraordinary taxes on power companies and financial institutions in the country in order to help people in coping with the rising numbers of inflation.

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