Key points
- European markets saw gains that mirrored the strong US performance.
- Inflation data (PPI and CPI) will influence interest rate decisions.
- China’s consumer prices fell more than expected in August.
- Several corporate announcements impacted individual stock performances.
European stock markets experienced a surge on Wednesday, fueled by the positive momentum from overnight gains on Wall Street. Major indices, including Germany’s DAX (+0.13%), France’s CAC 40 (+0.35%), and the UK’s FTSE 100 (+0.22%), all recorded increases. This upward trend followed record-high closing numbers for all three major US indices on Tuesday, bolstering investor confidence.
The anticipation of a Federal Reserve interest rate cut next week significantly contributed to this positive sentiment. While a rate cut is largely expected, the magnitude – a standard 25 basis-point reduction or a more substantial 50 basis-point cut – will hinge on upcoming inflation data.
Crucial economic indicators are scheduled for release throughout the week. The US Producer Price Index (PPI) is due later Wednesday, followed by the closely watched Consumer Price Index (CPI) on Thursday. Economists predict a 0.3% monthly increase for both, potentially pushing the annual headline CPI to 2.9% and leaving the core reading unchanged at 3.1%.
Meanwhile, data from China revealed a more pronounced-than-anticipated drop in consumer prices during August, highlighting the ongoing struggles with deflation despite government stimulus efforts. Producer prices in China also extended their decline for the 35th consecutive month.
In European political news, French President Emmanuel Macron appointed Sebastien Lecornu as the new Prime Minister. This move signals Macron’s intent to proceed with his pro-business reform agenda, albeit with a minority government. Unusually, Macron requested Lecornu engage in discussions with all parliamentary forces to seek consensus on budgetary and policy matters before cabinet appointments.
French markets face further scrutiny on Friday when Fitch Ratings reviews France’s credit rating, currently AA- with a negative outlook. This follows a downgrade by Moody’s last year. Elsewhere in Europe, Spanish industrial production increased by 2.5% annually in July, surpassing the revised 1.9% growth rate of the previous month.
Corporate news included mixed results. Inditex reported weaker-than-expected second-quarter sales but noted improving figures for August. Baloise, a Swiss insurer, reported a significant 25.5% rise in first-half net profit. Conversely, Novo Nordisk announced plans for a substantial reduction in jobs, resulting in the loss of approximately 9,000 positions, representing around 11.5% of its workforce.
Positive news came from Oracle Corporation, whose stock soared after the company projected over half a trillion dollars in booked revenue for its Oracle Cloud Infrastructure business. Oil prices also rose, driven by geopolitical tensions in the Middle East and potential further restrictions on Russian oil supplies.
