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Forex Analysis & Reviews: Weak euro and strong reporting provide European stock market with strong growth
time 16.08.2022 11:45 PM
time Rilevanza fino a, 17.08.2022 06:02 PM

The key stock indicators of Western Europe showed an increase on Tuesday. Market participants are closely watching the permanent weakening of the euro against the US dollar. In addition, investors are focused on the quarterly reports of the largest European companies.

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Thus, by the time of writing, the composite index of the leading European companies STOXX Europe 600 increased by 0.26% - up to 443.48 points.

Meanwhile, the French CAC 40 gained 0.29%, the German DAX climbed 0.55% and the UK FTSE 100 gained 0.56%.

By the way, in Tuesday's trading, the stock index CAC 40 is close to the highest level since April 21.

Rising and Falling Leaders

German food delivery service Delivery Hero SE soared 6.9%. The day before, the company confirmed its financial targets for 2022 and said it expects a 7% growth in turnover in the next quarter.

Dutch consumer goods and medical equipment maker Royal Philips NV rose 2.7%. News broke on Tuesday that the company had named Roy Jacobs as its new CEO. Jacobs plans to take up duties on October 15.

The market capitalization of British-Australian mining giant BHP Group, Ltd. rose by 4.2%. According to the results of the fiscal year ended in June, the company increased its net profit by a record 26% to $30.9 billion from $11.3 billion a year earlier. The bottom line was BHP's highest earnings since 2011 on the back of rising commodity prices.

Glencore rose 3.77%, British Petroleum 0.66%, ArcelorMittal 1.95% and Rio Tinto PLC 2.43%.

Danish jewelry company Pandora AS fell 7.2% on Tuesday. In April-June, the company reduced its net profit, but increased its revenue and confirmed its full-year forecast.

Swedish retailer Hennes & Mauritz AB slipped 0.2%. The company's products have returned to the Chinese online platform Tmall after a year and a half of absence from the site due to the company's decision to stop purchasing from the Xinjiang Autonomous Region of China.

British fashion chain Ted Baker PLC jumped 16% after US-based Authentic Brands agreed to buy the company in a $254.26 million deal.

What's Going on in the Market Right Now?

The focus of European investors on Tuesday is the losing ground of the euro. Thus, the euro's rate against the US dollar has already fallen by 0.29% - to 1.0131 on Tuesday. The weakening of the euro position provides significant support to the relative income of exporting companies from the euro region.

The main reason for the depreciation of the currency, market analysts call weak macroeconomic statistics from Europe.

It became known on Tuesday morning that the deficit of the foreign trade balance of the eurozone states fell to 24.6 billion euros in June from 26.3 billion, noted in May. At the same time, experts previously predicted a deficit of 20 billion euros.

Meanwhile, the unemployment rate in the UK in April-June amounted to 3.8% amid a more cautious attitude of companies to hiring staff. By the way, the final figure coincided with market forecasts. The number of people employed in the economy over the same period increased by 160,000. Analysts expected an increase of 256,000. At the same time, the number of vacancies in Britain decreased for the first time since mid-2020.

Later on Tuesday, European investors await the release of the August Economic Sentiment Index (ZEW) in Germany. This index will be the subject of careful analysis by market participants in order to look for signs of a decline in confidence in the German economy.

Trading Results the Day Before

Last Monday, European stock indicators showed a moderate rise amid corporate news. In addition, market participants analyzed the latest information from China on the reduction of the key rate by the central bank amid weak data on the country's economy.

As a result, the composite index of leading European companies STOXX Europe 600 increased by 0.34% to 442.35 points. The highest results among the components of the index were shown by the securities of the low-cost airline Wizz Air Holdings PLC, which rose in price by 7.5%.

Meanwhile, the French CAC 40 rose 0.25%, the German DAX gained 0.15% and the UK FTSE 100 climbed 0.11%.

The value of securities of the British-Swedish pharmaceutical company AstraZeneca PLC rose by 2.3%. Managers of the drug manufacturer reported that the anti-cancer drug Enhertu, developed jointly with the Japanese Daiichi Sankyo, slowed the progression of a form of breast cancer in patients. This announcement by AstraZeneca management raised the prospects for new approvals from healthcare regulators.

The market capitalization of German food delivery service and food kits HelloFresh soared 2.7%. The company reiterated its full-year guidance and said it expects revenue growth of 18% to 23%.

Quotes of the German consumer goods company Henkel AG & Co. St increased by 1%. The day before, it reported that in the first quarter of fiscal 2022, it increased sales by 8.9%, but reduced profits amid rising prices for raw materials and transportation.

The share price of the British consulting company TP Group PLC increased by 2.9%. On Monday, it released audited financials for last year, showing its pre-tax loss rose to $9.7 million year-on-year.

The value of securities of the Dutch aircraft manufacturer Airbus SE increased by 0.4% due to the news of the purchase of 20 A330-900 aircraft from it by the Malaysian company Malaysia Aviation Group.

The market capitalization of Scandinavian air carrier SAS AB soared 6.7%. It previously received a $700 million loan from the American investment company Apollo Global Management, Inc. as part of the restructuring plan.

On Monday morning, Chinese media reported that the People's Bank of China injected about $60 billion into the country's financial system as part of the medium-term lending program (MLF).

In addition, the central bank reduced the interest rate on loans for a year, issued under the MLF, by 10 basis points - to 2.75% from 2.85%. Traditionally, the rate cut signals a slowdown in the Chinese economy in the past month.

Analysts say the world's second-largest economy has yet to recover from the damage caused by severe coronavirus restrictions.

Thus, in July, the indicator of the country's industrial production increased by 3.8% in annual terms compared to 3.9% in June. At the same time, economists predicted growth of 4.6%.

Retail sales in China rose 2.7% from a year earlier. At the same time, experts predicted an increase in the indicator by 5%.

European stock market participants analyzed data from China with great caution and avoided drastic steps. At the same time, protective assets - securities of European healthcare and telecommunications companies - became the key upward factor for the indices on Monday.

An additional catalyst for the growth of European stock markets was also macroeconomic statistics for the region. Thus, in April-June 2022, the Danish economy grew stronger than the market predicted - by 0.7% compared to January-March.

Meanwhile, the growth of wholesale prices in Germany in the past month decreased to 19.5% in annual terms after the growth of 21.2% in June. On a monthly basis, prices decreased by 0.4%.

Irina Maksimova,
Esperto analista di InstaForex
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