MARKETS EUROPE/Weak – Inflation weighs on sentiment

By Herbert Rude

FRANKFURT (Dow Jones) — After a firmer opening, European stock markets fell significantly again on Tuesday afternoon. The DAX lost 1 percent to 12,673 points, the Euro-Stoxx-50 fell by 0.9 percent to 3,468 points. Sentiment is depressed by significantly rising interest rates and yields. With the sharp rise in German producer prices, interest rate speculation in the euro zone increased again. In addition, the Swedish central bank unexpectedly increased the key interest rate by 100 basis points. Some market participants see this as a “bad omen” for the 2-day meeting of the US central bank that is just beginning. Here, too, only a key interest rate increase of 75 basis points is expected, but an even larger step cannot be ruled out.

Technology stocks, construction stocks, commodity stocks and industrial stocks are particularly under pressure. The Stoxx sector index for real estate shares lost the most with almost 5 percent minus. The winners of the rising interest rates are the banks, whose Stoxx sub-index rose by 0.3 percent. The rates of the Scandinavian banks in particular are following those of Sweden rate hike clearly to.

German producer prices with strongest increase since the beginning of the data series

Jens-Oliver Niklasch from LBBW describes the 7.9 percent increase in producer prices compared to the previous month as an “incredible price hammer” – the highest rate since the start of the data series in 1949. They were 45.8 percent above the level of the same month last year. The reason for this was again energy prices. But this time not only oil or gas, but also electricity. Companies would only be able to pass part of the price increases on to their customers. But even this remainder will continue to fuel inflation. “None of this bodes well for inflation. It’s here to stay.”

Interest rate futures Monday afternoon suggested an 82 percent chance the Fed will hike rates by 75 basis points and an 18 percent chance the Federal Reserve will hike rates by 100 basis points, the US said CME Group.

“We fear that the Fed could surprise us with another jumbo rate hike,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. Corporate warnings over the past week indicated that “we may very well be at the beginning of the US recession.” On the other hand, analysts at JP Morgan think the market may have bottomed after last week’s sell-off. With robust corporate earnings, keen investor pessimism and signs that the Fed is able to dampen inflation expectations, “any downside from here would be limited,” it said.

Henkel also in the red – good interest in the Porsche IPO

In the DAX, Henkel are in the spotlight. As part of its Capital Markets Day (CMD), the Group raised its forecast for organic sales growth in the current year to 5.5 to 7.5 percent after previously 4.5 to 6.5 percent. The increase comes as no surprise. Berenberg had already written in the outlook for the CMD that the company could raise the target to the upper end of the range. After initial gains, the share slipped into the red and lost 1.4 percent.

The biggest losers in the DAX are Vonovia and Heidelbergcement, each with discounts of almost 4 percent. On the other hand, Porsche Holding is up 4.9 percent and VW is up 0.2 percent. In the trade there are reports of good interest in the IPO of Porsche AG. The book for the shares in the sports car manufacturer has already been oversubscribed, they say. The subscription period runs until September 28th.

Air France-KLM and Fraport firmly – Lenzing collapse

Fraport rose by 2.1 percent in the MDAX, the analysts from Barclays have upgraded the shares to overweight. In Paris, Air France-KLM gain 3.9 percent, the aviation group speaks of strong demand and wants to increase capacities towards the pre-pandemic level.

Lenzing shares collapsed by 20.4 percent after the company dropped the earnings forecast for 2022 the previous evening due to limited forecast reliability and high volatility in the energy and raw material markets. “In the coming days and weeks we will probably see a few more companies from the manufacturing sector withdrawing their forecasts with reference to energy and raw material costs,” fears one market participant.

Kingfisher under pressure after half-year figures

According to the half-year figures, Kingfisher is down 2.7 percent. Pre-tax profit of £474m is almost exactly in line with forecast of £475m. However, sales of £6.81 billion fell short of the forecast of £6.88 billion. Investors could also be disturbed by the uncertain outlook. Kingfisher said like-for-like sales from August to September 17 fell 0.7 percent year-on-year. Due to rampant inflation, consumers are increasingly cutting back on their consumption.

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Stock index last +/-% absolute +/-% YTD

Euro Stoxx 50 3,468.04 -0.9% -31.45 -19.3%

Stoxx 50 3,433.42 -0.6% -19.72 -10.1%

DAX 12,673.01 -1.0% -130.23 -20.2%

MDAX 23,696.03 -1.1% -274.30 -32.5%

TecDAX 2,762.64 -1.6% -44.82 -29.5%

SDAX 11,177.66 -1.7% -197.35 -31.9%

FTSE 7,197.91 -0.5% -38.77 -2.0%

CAC 5,986.28 -1.2% -75.31 -16.3%

Fixed income market last absolute +/- YTD

German ten-year return 1.94 +0.14 +2.12

US 10-year yield 3.57 +0.08 +2.06

FOREX last +/- % Tue 8:05 Mon 17:06 % YTD

EUR/USD 0.9975 -0.5% 1.0016 1.0013 -12.3%

EUR/JPY 143.38 -0.2% 143.62 143.50 +9.6%

EUR/CHF 0.9649 -0.2% 0.9676 1.0363 -7.0%

EUR/GBP 0.8751 -0.2% 0.8772 0.8774 +4.2%

USD/JPY 143.74 +0.4% 143.42 143.24 +24.9%

GBP/USD 1.1398 -0.3% 1.1416 1.1417 -15.8%

USD/CNH (Offshore) 7.0273 +0.3% 7.0173 7.0065 +10.6%

Bitcoin

BTC/USD 18,915.97 -3.2% 19,338.90 19,307.13 -59.1%

CRUDE OIL last VT settlem. +/- % +/- USD % YTD

WTI/Nymex 84.41 85.73 -1.5% -1.32 +18.9%

Brent/ICE 90.90 92 -1.2% -1.10 +22.9%

GAS VT Settlem. +/- EUR

Dutch TTF 184.70 182.26 +1.3% +2.43 +187.1%

METALS last day before +/- % +/- USD % YTD

Gold (Spot) 1,664.49 1,676.10 -0.7% -11.61 -9.0%

Silver (Spot) 19.15 19.63 -2.4% -0.48 -17.9%

Platinum (Spot) 921.50 923.15 -0.2% -1.65 -5.1%

Copper Future 3.53 3.54 -0.4% -0.01 -20.4%

YTD relative to previous day’s close

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Contact the author: [email protected]

DJG/hru/ros

(END) Dow Jones Newswires

September 20, 2022 09:57 ET (13:57 GMT)

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