European shares showed limited movement on Tuesday as investors awaited significant inflation data set to be released later in the day. The STOXX 600, a benchmark index for European stocks, experienced a minor rise of 0.1%, closing at 523.42. This followed a notable downturn the previous day, marking the worst performance in over a week. Gains in tech stocks, which rose by 1%, were counterbalanced by a nearly equivalent drop in luxury stocks, which saw a decline of around 1%.
Last week, European luxury firms enjoyed a rally, contributing to new peaks for the STOXX 600, buoyed by economic stimulus efforts from China. However, according to Fiona Cincotta, a senior market analyst at City Index, a temporary pause in the upward trend is a typical occurrence after such strong gains.
The energy sector faced challenges, slipping by 0.9%, partly due to Neste Oyj, a biofuels manufacturer, which saw its shares fall by 5.8%. Market participants are now closely watching the Eurozone’s preliminary inflation data for September, expected at 0900 GMT. The outcome of this data could play a crucial role in determining whether the European Central Bank (ECB) decides to reduce interest rates at its upcoming meeting in two weeks.
On Monday, ECB President Christine Lagarde expressed growing confidence that inflation would eventually decline to the target rate of 2%. Investors are also monitoring the comments from various ECB officials, including Vice President Luis de Guindos, Olli Rehn, and board member Isabel Schnabel, as they are scheduled to speak at different events throughout the day, potentially providing further insight into future rate policies.
In contrast, manufacturing across the Eurozone experienced a noticeable decline, with activity contracting at the fastest rate this year in September. Germany’s manufacturing sector, in particular, showed the sharpest reduction in a year, according to PMI data. France also continued to experience a contraction in its manufacturing sector in September, and Italy’s manufacturing industry shrank for the sixth consecutive month.
In individual stock news, Covestro’s shares surged by 3.8% following the announcement that Abu Dhabi National Oil Company (ADNOC) had reached an agreement to acquire the German chemical company for 14.7 billion euros ($16.4 billion). Meanwhile, Anheuser-Busch InBev saw its stock rise by 2.3% after Citigroup upgraded the brewer’s rating from ‘neutral’ to ‘buy’.
On the global front, Federal Reserve Chair Jerome Powell suggested that the U.S. central bank might continue with more modest rate reductions of 25 basis points. This statement came after recent data boosted confidence in the resilience of economic growth and consumer spending. Fiona Cincotta from City Index commented that the market’s expectations for a larger 50 basis-point rate cut were likely exaggerated, and the optimism around this prospect has since been tempered.
JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
