August 16, 2022

European STOXX 600 Ends Day On A Strong Note

On Thursday, the pan-European STOXX 600 index ended the day close to a seven-week high, thanks to a number of upbeat earnings from several companies.

These include names like Ipsen and Moncler, while worries of the future pace of interest rate increases by the US Federal Reserve eased due to weak GDP data for the second quarter.

Index movements

The continent-wide index rose by 1.1% to close at 432.77 points, which saw it record gains for the second day in a row.

There was a 16.2% rise in the shares of Ipsen after the biopharmaceutical group posted strong earnings and also gave its outlook a boost.

The upbeat sales of puffer jacket manufacturer Moncler gave luxury stocks a lift. It recorded gains of 8%, while a 4.2% rise was recorded by LVMH. The Louis Vuitton owner gave the STOXX 600 its biggest boost.

However, there was a 0.5% decline in Spain’s IBEX index, as there was a drop in Santander, which is the second-biggest lender in the euro zone. The bank missed its profit estimates.

Market analysts said that the earnings session for the second quarter had been in accordance with expectations so far.

However, they added that there was a risk that the good performance recently was just a bear market rally, as the economic outlook and earnings have begun clouded and there is a weakness in consumer spending.

The US data

Data across the Atlantic showed that there was a second consecutive quarterly decline in the US economy, as consumer spending grew at its slowest pace in the last two years, fueling recession concerns.

The report emerged a day after the interest rate hike of the US Federal Reserve by three-quarters of a percentage point. However, it dropped guidance that they would slow down at an appropriate point.

Analysts said that this data would not deter the US Fed from its path much, at least not right away. But, it is likely that the most aggressive movements are already done.

Moving into 2023, the inflation and growth dynamics would signal that the Fed needs to take a less aggressive approach.

Other stocks

This year has seen the STOXX 600 record decline, as investors are expecting corporate profits to take a hit because of worries about the central bank taking an aggressive approach to curtail inflation.

There are worries that the aggressive approach could drive the economy to the cusp of recession. Worries have been exacerbated because of Europe’s energy crisis, fueled by the Russia and Ukraine war.

Data indicated that there was an unexpected increase in German inflation in July, primarily because of the energy supply crisis.

There was a 2.1% rise in the main stock index in Milan, thanks to upbeat quarterly results from chipmaker STMicroelectronics and carmaker Stellantis.

There was a 15.9% surge in Vestas Wind after an agreement was reached between US Democratic senators on a bill for green energy investments.

An 18.6% fall in Scor was seen after a second-quarter loss was posted by the French reinsurer because of the Ukraine war.

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