European Stocks Close On Mixed Note

European stocks closed on a mixed note on Wednesday with investors digesting U.S. consumer price inflation data and assessing the likely move of the Federal Reserve with regard to the size of interest rate cut next week.

Investors now await the European Central Bank’s monetary policy announcement on Thursday. The ECB is widely expected to lower interest rates for the second time this year.

The pan European Stoxx 600 edged down 0.01%. The U.K.’s FTSE 100 ended lower by 0.15% and France’s CAC 40 closed 0.14% down, while Germany’s DAX gained 0.35%. Switzerland’s SMI ended down 0.35%.

Among other markets in Europe, Austria, Belgium, Finland, Greece, Iceland, Poland, Russia, Sweden and Turkiye closed weak.

Denmark, Netherlands, Norway, Portugal and Spain ended higher.

In the UK market, Entain climbed more than 4%. ICG, Prudential, Endeavour Mining Plc, BT Group, Lloyds Banking Group, Next, Burberry Group, Rio Tinto, Natwest Group, Vodafone Group, Antofagasta, Melrose Industries and Reckitt Benckiser gained 1 to 2.3%.

Rentokil Initial plunged more than 20% after a profit warning. The company said that despite some positive momentum in North American sales activity at the end of the second quarter, trading performance in July and August fell short of expectations.

Additionally, branch integration has caused minor disruptions to organic growth. Consequently, the company now anticipates Organic Revenue growth in North America of about 1% for the second half of 2024.

Howden Joinery, Vistry Group, Mondi, Berkeley Group Holdings, Centrica, Ashtead Group, Coca-Cola, Diploma, Marks & Spencer, Persimmon and Smith (DS) ended down 1 to 2%.

In the German market, Commerzbank shares soared nearly 17% after Italian lender UniCredit took a 9% shareholding in the German bank and said it will seek approval to potentially buy more.

BMW and Porsche gained 3% and 2.4%, respectively. Siemens Energy climbed nearly 2% and Adidas gained about 1.8%. Infineon, Covestro and SAP also ended notably higher.

Bayer closed more than 2% down. Deutsche Bank, Fresenius Medical Care, Puma, Zalando and Vonovia lost 1.2 to 2%.

In the French market, Dassault Systemes gained 2.25%. Pernod Ricard, AXA, Legrand, Accor, BNP Paribas, Vivendi and TotalEnergies also closed higher.

Edenred, L’Oreal, Unibail Rodamco, Eurofins Scientific, Sanofi, LVMH, Saint Gobain and Stellantis ended with sharp to moderate losses.

In European economic news, the UK economy unexpectedly stagnated in July as falls in production and construction was offset by an increase in services output, official data revealed.

Real gross domestic product showed nil growth for the second straight month, the Office for National Statistics reported. GDP was forecast to grow 0.2%. The 0.1% rise in services output was offset by decreases of 0.8% in production output and 0.4% in construction output.

In the three months to July, GDP advanced 0.5% with strong contribution from services output. Services output gained 0.6% and construction climbed 1.2%, while production output was down 0.1%.

Data from the Labor Department showed U.S. consumer price index rose by 0.2% in August, matching the uptick seen in July as well as economist estimates.

However, core consumer prices, which exclude food and energy prices, climbed by 0.3% in August after rising by 0.2% in July. Economists had expected core prices to rise by another 0.2%.

The Federal Reserve is still likely to lower interest rates next week, but the bigger than expected increase by core consumer prices is seen as reducing the chances the central bank lowers rates by 50 basis points.

Following the report, CME Group’s FedWatch Tool is indicating an 83% chance of a quarter point rate cut and just a 17% percent chance of a half-point rate cut.

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