European stock markets exhibited upward momentum on Thursday as investors processed a series of corporate earnings reports and eagerly awaited the release of a critical U.S. inflation reading. The DAX index in Germany saw a 0.8% gain, while the CAC 40 in France experienced a 1.3% increase, and the FTSE 100 in the U.K. climbed by 0.1%.
The prevailing positive sentiment was further bolstered by the performance of the banking sector, which rebounded from the one-month lows observed earlier in the week. This resurgence followed the Italian government’s announcement of a windfall tax on its lenders. Swift clarification from the government that the tax would not exceed 0.1% of their total assets served to restore fragile investor confidence.
Continuing the trend of the earnings season, Siemens stock faced a 2.6% decline subsequent to the German engineering group’s report of third-quarter profits falling below expectations. The company noted a “normalization in demand,” particularly in China. Conversely, Thyssenkrupp stock observed a 2.8% rise as the German industrial conglomerate targeted the upper end of its operating profit outlook range for 2023. This optimistic outlook was underpinned by a robust third quarter, which yielded better-than-anticipated results for its materials and steel units.
The positive momentum extended to the insurance sector, with Allianz stock rising by 3.2% and Zurich Insurance registering a 1.6% increase following their reports of better-than-expected results.
Conversely, Hapag Lloyd stock encountered a 2% decline after the German container shipper revealed a 67% decrease in net profit for the first half of 2023 compared to the previous year.
However, the spotlight of the day was cast on the eagerly awaited release of the latest U.S. inflation data. Forecasts indicated a slight uptick in the annual Consumer Price Index (CPI) figure to 3.3% for July, while the core rate, excluding volatile food and energy prices, was predicted to climb by 4.8% on an annual basis. The implications of this data are of particular interest as they could shape the Federal Reserve’s policy decisions in its upcoming September meeting. A subdued inflation release may reinforce expectations that the central bank will opt to conclude its interest rate hikes.
In the realm of commodities, oil prices exhibited a modest incline as markets approached the release of the key U.S. inflation data. Despite unexpected growth in U.S. inventories during the week to August 4, as reported by the Energy Information Administration, a substantial draw in gasoline and distillate stockpiles contributed to upward pressure on the crude market. This momentum held steady despite China’s gradual economic recovery, positioning it as the world’s leading oil importer.
As of 03:50 ET, U.S. crude futures demonstrated a 0.2% increase at $84.58 a barrel, while the Brent contract experienced a 0.3% climb to reach $87.78. Notably, Brent reached a six-month high on Wednesday, and WTI touched its most formidable level since November 2022.
Additionally, gold futures recorded a slight uptick at $1,951.15 per ounce, and the EUR/USD currency pair traded 0.3% higher at 1.1008. The evolving market landscape continues to be shaped by a confluence of factors, from corporate earnings to economic indicators, as investors navigate an ever-changing financial environment.
