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Trends & Analysis
News

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European stocks rise, settle at one-month high

 

Friday, July 21, 2023

Today’s headlines

What’s happening: European stocks closed higher on Thursday, as traders assessed the start of the latest earnings season.

What happened: The STOXX Europe 600 Index settled at a one-month high, after recording gains for the third straight session in a row on Thursday.

However, chip stocks declined, following lower profits and a bleak sales outlook from the world’s largest chipmaker.

Why it matters: The pan-European index had gained around 0.3% on Wednesday and the FTSE 100 surged 1.8% on a better-than-expected inflation report from the UK and strong earnings from major companies.

Mining and healthcare stocks in Europe gained around 1.6% each on Thursday. However, the tech sector, which has added around 23% so far this year, was the top loser, down about 2.5% on Thursday.

Shares of semiconductor companies, including ASML and Aixtron moved lower after Taiwan Semiconductor Manufacturing, the world’s largest chipmaker, projected a decline in sales for 2023 citing global economic concerns.

Shares of Volvo Cars fell more than 4% on Thursday, after the company reported a 54% decline in operating earnings for the second quarter. Telenor’s shares jumped more than 6.5% on the company’s better-than-expected second-quarter earnings.

Shares of Electrolux fell to the bottom of the pan European index, after shedding more than 20% on Thursday, as investors assessed the home appliance maker’s losses in the latest quarter.

Eurozone’s consumer confidence indicator increased 1 point to a reading of -15.1 in July, better than market estimates of -16. The Eurozone’s economy stalled in the first quarter, avoiding a technical recession. The current account deficit in the bloc narrowed to €11.3 billion in May, from €29 million in the year-ago month.

The pan-European STOXX 600 index gained 0.42% to close at 463.93 on Thursday, after surging to an intraday high of 464.17 points. Germany’s DAX 40 rose 0.59% to 16,204.22, while France’s CAC 40 gained 0.79% to settle at 7,384.91 on Thursday.

London’s FTSE 100 added 0.76% to close at 7,646.05, rising to its highest level in two months, driven by a surge in industrial metal miner stocks.

What to watch: Investors will watch next week’s meetings of major central banks. Markets expect the European Central Bank to increase interest rates by 25 bps at its upcoming meeting.

The markets today

The Canadian dollar will be in focus today ahead of a basket of major economic reports

Context: The CAD/USD forex pair edged lower on Thursday, following a rebound in the US dollar.

Details: The loonie started the session on a positive note, but the greenback recovered later in the day on US jobless claims.

US initial jobless claims declined by 9,000 to 228,000 in the latest week. The figure was much better than the market expectations of 242,000. The latest reading marked a two-month low, signalling tightness in the US labour market.

The US Federal Reserve is widely expected to increase interest rates at its upcoming meeting on July 27.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.6% to 100.88 on Thursday.

Increase in prices for oil, one of Canada’s major exports, limited losses for the CAD/USD forex pair on Thursday. WTI crude oil futures gained 0.4% to close at $75.63 per barrel on Thursday.

The CAD/USD pair slipped to settle at 1.3173 on Thursday. The S&P/TSX Composite index fell 0.26% to close at 20,436.87, after rising to a two-month high in the previous session.

What are expectations: Traders await economic reports on new housing price index, retail sales and manufacturing sales from Canada today. New home prices in Canada, which rose slightly by 0.1% in May, are expected to decline 0.1% in June. Analysts expect retail sales in Canada to grow 0.5% in May, following 1.1% growth in April. Manufacturing sales are likely to decline 0.3% in June, after increasing 1.2% in May.

Other Markets: US trading indices closed mixed on Thursday, with the S&P 500 and Nasdaq 100 down by 0.68% and 2.28%, respectively, and the Dow Jones index up by 0.47%.

The news shaping the markets

The Departments of Treasury and State said that the US has imposed sanctions on Russia’s copper producer Ural Mining And Metallurgical Company to cut Russia’s sales from the metals and mining sector. The news sent the safe-haven US dollar index slightly lower this morning.


Japan’s annual inflation rate in Japan rose to 3.3% in June, from 3.2% in May, which exerted pressure on the JPY/USD forex pair.


South Korea’s producer prices fell by 0.2% year-over-year in June, following a 0.5% rise in the prior month, sending the KRW/USD pair lower in forex trading this morning.


Mexico’s retail sales rose by 2.6% year-over-year in May, easing from the previous month’s 3.8% surge. This exerted pressure on the MXN/USD forex pair.


US existing home sales declined 3.3% to an annualised 4.16 million units in June, sending the Nasdaq 100 index lower by 360 points on Thursday.

What else to watch today

UK’s retail sales and public sector net borrowing, Central Bank of Russia’s interest rate decision, India’s foreign exchange reserves, US Baker Hughes crude oil rigs, Spain’s consumer confidence indicator, as well as Brazil’s federal tax revenue.


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