uk inflation

Investors weigh earnings and inflation as Europe’s stocks sway.

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On Wednesday, European equities were little changed as traders weighed the start of the corporate earnings season against the risks posed by record inflation.

The Stoxx Europe 600 Index rose by less than 0.1 percent, with real estate stocks leading the way down. Personal care also underperformed as Tesco Plc, the UK’s largest grocer, warned of a profit squeeze this year. LVMH ended the session slightly higher, reversing earlier losses caused by a warning about a drop in demand due to Chinese lockdowns. Commodities helped miners and energy companies.

European equities have fallen this year as a result of rising inflation, hawkish central banks, and the economic impact of the Ukraine war, with rising bond yields also weighing on sentiment. The benchmark index briefly extended losses today after data showed that prices paid to US producers increased more than expected in March, and by the most since records began in 2010.

Inflation in the United Kingdom also reached a three-decade high of 7% last month, according to data.

“Europe is likely to continue to seesaw around war headlines, particularly as energy prices remain elevated as a result,” Esty Dwek, chief investment officer at Flowbank SA, said. “With lower earnings season expectations, Europe may not get much of a boost from results, especially since they will be mostly ‘pre-conflict’ data.”

JPMorgan Chase & Co. began the first-quarter earnings season today with a $524 million loss attributed to market repercussions of Russia’s invasion of Ukraine.

On rising energy bills, weaker consumption, supply issues, shipping costs, and potential gas disruptions, Goldman Sachs Group Inc. strategists recently reduced their 2022 estimate of Stoxx 600 earnings-per-share growth to 2% from 8%, well below the consensus of 13%. Goldman strategists said in a note that the Stoxx 600’s margins are close to a record and could be put under pressure by higher input costs.

“The fate of equities is largely determined by earnings,” wrote Barclays Plc strategists led by Emmanuel Cau in a note, adding that corporate guidance is becoming more important as investors focus on pricing, margins, supply chain issues, and demand.

Darktrace Plc fell 12 percent, among other individual movers, despite the cybersecurity company raising full-year revenue growth forecasts.  (Report: Bloomberg)

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