August 16, 2022

European Shares End Winning Streak Of Three Days

On Wednesday, European stocks put an end to a winning streak of three days due to jitters about the gas supplies to the continent from Russia. Meanwhile, there was a decline in Italian shares because of a political crisis engulfing the government of Prime Minister Mario Draghi.

The Italian turmoil

There was a 1.6% decline in the MIB index in Italy due to weakness in bank stocks. In order to decide if his government will continue in office or not, the Italian premier requested that the upper house Senate conduct a confidence vote. This is expected to take place at 1730 GMT after the market closes.

Last week, Mario Draghi has given his resignation, but the President of Italy, Sergio Mattarella asked him to reconsider his decision. This was after a confidence vote was boycotted by the 5-Star coalition and this sent the MIB index to lows last seen in November 2020.

Market analysts said that if Draghi does decide to resign, then there is a possibility that the president would reach out to all the political parties for a consultation in order to confirm if a new government can be formed with a different prime minister, as long as there is the majority in the parliament. The purpose of doing so would be to pass the 2023 budget law before elections are called. Analysts asserted that achieving this outcome would definitely not be easy and would increase the political uncertainty even further.

Stock index falls

There was a 0.5% gain in the continent-wide STOXX 600 index, but it erased the gains and ended the day lower by 0.2%. The market sentiment was dealt a blow by the European Union’s order to member states about cutting down gas consumption by 15% till March of next year as an emergency measure.

This was after Russian President Vladimir Putin warned that the gas supplies from Russia sent from the biggest European pipeline called Nord Stream 1 would be reduced and may eventually stop. On Tuesday, the benchmark index had reached a high of five weeks when sources said that the Nord Stream 1 pipeline would resume the supply of gas as per schedule after its maintenance shutdown.

Stock performances

There was a 9.4% fall in HelloFresh stocks after the meal-kit maker from Germany cut back on its outlook for the year because of falling consumer confidence, rising inflation, and the war in Ukraine. A 5.2% drop was also recorded in Volvo cars after the company warned off a potential fall in retail sales for the year.

As of Tuesday, there is expected to be a 22.1% increase in earnings for the second quarter, as opposed to a year earlier, as the energy sector is expected to present some upbeat figures. A 12.7% rise was also recorded in Uniper after a report disclosed that a 30% stake in the company would be bought by the German government. Plus, they would also permit the German utility company to share some of the cost burdens with its customers.

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