European Stocks Close Weak Despite Strong Economic Data

Despite some encouraging eurozone economic data and dovish comments from the U.S. Federal Reserve Chairman Jerome Powell, European stocks closed weak on Wednesday as worries about inflation rendered the mood bearish.

Comments from Federal Reserve Chair Jerome Powell have eased some of the concerns about the outlook for monetary policy that weighed on global markets last week.

Powell has downplayed the risk of inflation and stressed the central bank would not raise rates “preemptively,” but traders know the Fed will eventually start tapering its asset purchases.

The pan European Stoxx 600 declined 0.73%. The U.K.’s FTSE 100 ended down 0.22%, Germany’s DAX ended lower by 1.15% and France’s CAC 40 shed 0.91%, while Switzerland’s SMI ended 0.7% down.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Ireland, Netherlands, Portugal, Spain, Sweden and Turkey ended notably lower. Czech Republic edged down marginally.

Greece, Iceland, Norway, Poland and Russia closed on positive note.

In the UK market, Melrose Industries, Informa, Taylor Wimpey, Compass Group, Evraz, Persimmon, Barratt Developments and Fresnillo lost 1.4 to 2.7%.

Persimmon shed 1.7%. The company has agreed a number of voluntary informal undertakings relating to its historic sale of leasehold houses with the U.K. competition watchdog.

JD Sports Fashion, Royal Dutch Shell, BT Group, Rolls-Royce Holdings, Anglo American Plc and GlaxoSmithKline gained 1 to 2%.

In France, Vivendi, Accor and Kering shed nearly 3%. LVMH shares declined following a rating downgrade from HSBC. Orange, Safran, Bouygues, Engie, Sodexo and Airbus Group also ended notably lower.

Pernod Ricard gained over 2% after the French drinks group raised its annual profit guidance, citing a stronger-than-expected recovery with the removal of COVID-19 curbs.

ArcelorMittal, Teleperformance, Total and Air France-KLM gained 1 to 2.2%.

In the German market, Lufthansa ended more than 3% down. Volkswagen lost nearly 2.5%. Infineon Technologies, BMW, Linde, Munich RE, Deutsche Telekom, SAP and Daimler shed 1 to 1.4%, while Thyssenkrupp gained more than 1%.

Flash survey data from IHS Markit showed that the euro area private sector grew at the fastest rate in 15 years in June as the economy re-opened further from virus-fighting restrictions and vaccine progress boosted confidence. At 59.2, the flash composite output index hit a 180-month high, up from 57.1 in May.

The services Purchasing Managers’ Index advanced to 58.0 in June from 55.2 in the previous month, while the manufacturing PMI held steady at 63.1 in June.

Inflation pressures continued to mount as input prices soared in the month. The manufacturing input prices index rose to 88.0 from 87.1, the highest since the survey began in June 1997.

France’s private sector grew at the fastest pace in almost a year in June, flash survey results from IHS Markit showed. The composite output index rose marginally to 57.1 in June from 57.0 in May. But the index remained below economists’ forecast of 59.0.

Germany’s private sector grew at the fastest pace in more than a decade in June with the further easing of COVID-19 restrictions, flash survey results from IHS Markit showed. The flash composite output index climbed to a 123-month high of 60.4 from 56.2 in the previous month.

Elsewhere, the flash composite output index for U.K. dropped to 61.7 in June from 62.9 in May.

The rate of input cost inflation accelerated for the fifth month running and was the joint-fastest on record. In turn, the rate of output price inflation hit a fresh record high for the second month running.