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European Markets Close Higher on Gains in Mining and Retail Sectors

European markets closed higher on Wednesday as investors digested euro zone economic data and awaited the U.S. Federal Reserve’s latest meeting minutes.

November 23, 2022
18 minutes
minute read

European markets closed higher on Wednesday as investors digested euro zone economic data and awaited the U.S. Federal Reserve’s latest meeting minutes.

The pan-European Stoxx 600 index closed up 0.7% on Wednesday, extending its gains from earlier in the session.

Travel and leisure stocks rose 1.9% on Wednesday, retail and mining stocks both added around 1.8%, and technology stocks were up 1.4%. The gains came as investors continued to bet on a strong economic recovery.

The European blue chip index closed Tuesday’s session up 0.8% at its highest level in three months. This followed gains on Wall Street overnight, which were mirrored in markets across the Asia-Pacific region on Wednesday.

U.S. stocks rose in early trade as investors looked ahead to the publication of minutes from the Federal Reserve's November meeting. Investors were seeking clues on the direction of monetary policy from the minutes.

Recent lower-than-expected consumer and wholesale inflation prints in the United States have given global markets some hope, prompting bets that the Fed will have to slow its aggressive interest rate hikes.

European investors were also inspecting Wednesday’s flash November PMI (purchasing managers’ index) readings from the euro zone. The readings showed that the 19-member currency bloc has entered recession, but the downturn in business is slowing slightly.

The Stoxx 600 index, which covers European stocks, rose 0.6% on Wednesday, with travel and leisure stocks up 1.9% and mining stocks up 1.8%.

Credit Suisse was the worst-performing stock on the day, shedding 6% after approving a 4 billion Swiss franc ($4.2 billion) capital raise. The move is set to fund the company's massive strategic overhaul.

Nemetschek, a German software company, topped the index with an 8% rise. The company launched a new cloud-based service on Tuesday.

The Stoxx 600 index continued its rally in afternoon trading, reaching its highest level since August 19.

Mining stocks led the gains, up 1.8%, followed by travel stocks, up 1.5%, and technology and retail stocks, both up 0.4%.

Despite recent gloomy economic data, markets have brightened following a lower-than-expected U.S. inflation reading. This reading is anticipated to slow the pace of interest rate hikes, giving consumers some relief from the increasing cost of living in Europe.

Meanwhile, the Purchasing Managers' Index for the euro zone published Wednesday improved slightly from the prior month. This is a good sign for the euro zone economy, as it indicates that purchasing activity is picking up.

Unicredit, a banking group, has said that the reading dispels fears of a severe slump and is consistent with a mild technical recession at the turn of the year. This is good news for the economy, as it shows that despite some challenges, the overall picture is still positive.

Stocks rose slightly at the start of trading on Wednesday, the last full trading day of the week. Markets will be closed on Thursday for the Thanksgiving holiday and will close early on Friday.

The Dow Jones Industrial Average rose by 98 points, or by 0.29%. The S&P 500 gained 0.27% and the Nasdaq Composite increased by 0.45%.

Nemetschek's shares rose 7.5% on Tuesday after the German software company announced a new cloud-based service. The new service is designed to help customers manage their construction projects more efficiently.

Endesa, a Spanish power utility, fell more than 6% after releasing new 2023-24 targets that failed to impress analysts.

Beata Javorcik, chief economist at the EBRD, discusses the findings of the European Bank’s Energy Transition Report 2022-23. She notes that the transition to a low-carbon economy is essential to meeting the goals of the Paris Agreement, and that the EBRD is committed to supporting this transition. Javorcik highlights some of the key recommendations from the report, including the need for increased investment in renewable energy, energy efficiency, and electric vehicles.

Vincent Kaufman, CEO of the Ethos Foundation, has criticized Credit Suisse's strategic overhaul and treatment of existing shareholders ahead of a key vote. The Ethos Foundation represents hundreds of Swiss pension funds that are active shareholders in Credit Suisse.

Sven Jari Stehn, chief European economist at Goldman Sachs, says the energy crisis will push the euro zone into a “fairly shallow” recession next year. However, he adds that the region is “roughly” at peak inflation, with price rises expected to fall closer to 3% next year. This is good news for the euro zone, as it indicates that the region is nearing the end of its inflationary cycle.

Yogi Dewan of Hassium Asset Management believes that now is a good time to invest, as asset prices are currently low.

The Euro zone's November flash PMI readings on Wednesday showed that the 19-member currency bloc has entered recession, but the downturn in business activity has slowed slightly.

S&P Global's flash composite PMI rose to 47.8 in November from 47.3 in October, defying projections for a fall to 47.0. This index, which encompasses both services and manufacturing, is seen as a reliable gauge of economic health.

A reading below 50 indicates a contraction in activity, and November was the fifth consecutive month of shrinkage.

In November, the composite index in the U.K. was only slightly different from the October figure of 48.2, coming in at 48.3.

Berenberg economists Holger Schmieding and Kallum Pickering said in a note that although business expectations rebounded from the 30-month low in October, which was probably linked to the improving domestic political situation, current activity remains under severe strain from weak confidence, costs pressures and tight financial conditions.

Companies in the United States are still adding jobs, but the slowing pace of job creation is an ominous sign that employment will eventually start to fall as the recession deepens through winter.

Shareholders of Credit Suisse on Wednesday approved a 4 billion Swiss franc ($4.2 billion) capital raise in order to finance the lender's extensive strategic overhaul. This move comes as the company faces mounting pressure from shareholders and regulators.

Credit Suisse's capital raising plans are divided into two parts. The first part, which was approved by 92% of shareholders, involves selling shares to new investors, including the Saudi National Bank, through a private placement.

The new share offering will see the SNB take a 9.9% stake in Credit Suisse, making it the bank’s largest shareholder. This move will help to shore up the bank’s finances and provide it with some much-needed stability.

The second capital increase issues newly registered shares with pre-emptive rights to existing shareholders. This increase passed with 98% of the vote.

Credit Suisse shares fell more than 5% on Wednesday after the bank projected a 1.5 billion Swiss franc ($1.6 billion) loss in the fourth quarter. The bank also flagged further net outflows from its wealth management division.

Shareholders will vote on the group’s radical restructuring plans at an extraordinary general meeting on Wednesday. The plans include a new share issue to raise money to pay off debts, as well as a reduction in the number of board members.

Johnson Matthey shares fell sharply in early trading on Thursday, after the company posted a drop in half-year profit. Supply chain pressures weighed on production volumes for the company’s automotive customers, leading to the weak results.

At the top of the index, German entertainment company CTS Eventim added 4%. This brought the company's total value up to €24.6 billion.

Credit Suisse is expecting a fourth-quarter loss of 1.5 billion Swiss francs ($1.6 billion) as it undertakes a major strategic overhaul. This comes as the bank looks to streamline its operations and focus on its core businesses.

The lender announced a series of measures last month to address persistent underperformance in its investment bank and a series of risk and compliance failures that have resulted in consistently high litigation costs.

Shareholders will vote on the bank’s restructuring and capital raising plans at an extraordinary general meeting on Wednesday. This vote is a crucial step in the bank’s efforts to stay afloat and avoid bankruptcy.

Britain's FTSE 100 is expected to open around 12 points higher at 7,464, while Germany's DAX is seen gaining around 25 points to 14,447. France's CAC 40 is also seen gaining around 15 points to 6,673.

Electric vehicles are becoming increasingly popular, especially in China, which is the largest market for EVs in the world.

UBS believes that autonomous driving will be an even bigger megatrend than electrification, with a market size in China alone of around $100 billion by 2030.

UBS has provided some guidance on how investors can take advantage of this megatrend.

Shares in Coinbase have come under renewed selling pressure this week amid concerns about spillover from FTX's collapse earlier this month.

But many other companies are also exposed to the failure of FTX. Wall Street bank Morgan Stanley has identified a number of additional firms that are exposed to the failed crypto exchange.

Electric vehicle batteries are becoming increasingly important as the world transitions to cleaner energy sources. This is according to Goldman Sachs, who say that batteries are critical to this process.

Investment bank names two top stocks to play the EV battery sector, one with upside of nearly 70%.

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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