On Friday, key European stock indices rose dramatically. The positive previous closing of trading on the US stock market became the major catalyst for growth in European stocks. At the same time, strong performance of Asian stocks also had a beneficial effect. Moreover, stock market participants continue to discuss the outcome of the European Central Bank's September meeting on monetary policy.
By the time of writing, the STOXX Europe 600 index of Europe's leading companies increased by 1.41% to 419.92 points. Meanwhile, the shares of German energy company Uniper SE were top gainers among the STOXX Europe 600 components. They added 10.5%.
Meanwhile, the French CAC 40 gained 0.69%, the German DAX added 0.89%, and the British FTSE 100 rose by 0.98%. The day before, Buckingham Palace announced the death of British Queen Elizabeth II. Despite this news, the London Stock Exchange operated as normal today.
Top gainers and losers
The shares of British fire protection company London Security PLC fell by 4.8%. In the first half of fiscal 2022, the company cut pretax profits due to the permanent rise in costs amid inflationary pressures.
The stocks of UK retailer ASOS PLC rose by 1.6%. The company predicted revenue and profit in the current fiscal year at the level of market expectations. At the same time, ASOS PLC's sales in August were weaker than analysts expected.
Market sentiment
On Friday, European investors focused on the outcome of the European Central Bank's September meeting.
On Thursday, the regulator raised the benchmark lending rate to 1.25%, the deposit rate to 0.75%, and the rate on margin loans to 1.5%. At the same time, the discount rate was increased by 0.75% for the first time in history.
Moreover, the European Central Bank's representatives noted that the regulator intended to continue raising the rate at the upcoming meetings. Therefore, European Central Bank President Christine Lagarde said that further interest rate increases will depend on statistical data.
During its September meeting, the ECB also raised its forecast of consumer prices to 8.1% in 2022, to 5.5% in 2023, and to 2.3% in 2024. At the June ECB meeting, the preliminary figures were 6.8%, 3.5%, and 2.1% respectively.
According to the new ECB forecast, GDP growth in the euro area will total 3.1% in 2022 against the previously predicted 2.8%. At the same time, GDP forecasts for 2023 and 2024 were worsened to 0.9% from 2.1% and to 1.9% from 2.3% respectively.
Meanwhile, the global energy crisis with its consequences for the EU economy is still considered a significant downward factor for the European stock market.
Since the start of this week, gas prices have been under pressure due to disruptions in supply chains from Russia to Europe.
In late August, global gas prices soared above $3,500 per 1,000 cubic meters, hitting new historical records several times. The reason for this dramatic rise was Gazprom's announcement that one of major gas pipelines to Europe Nord Stream would shut down for three days to perform maintenance.
However, the scheduled maintenance work did not end. Meanwhile, Russia canceled the deadline for resuming gas supplies through the pipeline. Gazprom attributed this fact to malfunctions on the Trent 60 gas compressor unit due to oil leak.
The Nord Stream pipeline has been operating at only 20% of its capacity lately and its recent shutdown has raised fears about Europe's energy supply ahead of winter.
Experts believe that permanently rising energy prices will further fuel inflation in the eurozone, which is already rapidly approaching double digits.
On Friday morning it was reported that France's industrial production fell in July for the first time since April. This means that the country's leading companies have cut production amid falling demand and high price pressures.
Thus, the decline in July was 1.6% in monthly terms against an increase of 1.2% in June. At the same time, analysts forecasted the reduction of industrial production only by 0.5%.
Previous trading results
Last Thursday, European stock indices closed in the green zone. Stock market participants were anxiously awaiting the publication of the outcome of the European Central Bank's September meeting on monetary policy. The positive closing of Wednesday's trading on the US stock market became an additional catalyst for the growth in European stock indices yesterday.
Consequently, the STOXX Europe 600 index of Europe's leading companies rose by 0.5% to 414.09 points.
Meanwhile, France's CAC 40 gained 0.33%, Germany's DAX declined by 0.09%, and Britain's FTSE 100 added 0.33%.
Shares of British animal genetic breeding company Genus Plc soared by more than 13% on revenue growth in last fiscal year.
Stocks of French IT company Atos SE were down nearly 15%.
The market capitalization of British cybersecurity systems developer Darktrace plummeted by 31%. On Thursday, the company reported a return to pre-tax profits for the current fiscal year and nearly doubled its revenue. At the same time, Darktrace management also confirmed the end of talks with US investment firm Thoma Bravo about the possible sale of Darktrace.
The shares of British supplier of jet engines and auto parts Melrose Industries PLC sank by 2.3%. The day before, the engineering company announced that pre-tax losses in the past financial half-year were increased to 358 million pounds from 275 million pounds recorded a year earlier. Moreover, earlier international business newspaper Financial Times reported that Melrose Industries PLC planned to spin off its car division GKN in a new company registered in the UK.
The stocks of the British chain of restaurants and pubs Restaurant Group PLC rose by 2.1%. In January-June, Restaurant Group noticeably reduced its pre-tax loss due to strong revenue growth.
Shares of UK food processor and retailer Associated British Foods PLC were down 7.6%. The retailer projected a 40% increase in sales for the fiscal year ending September 17. At the same time, the company's management warned of a possible decline in adjusted profits next fiscal year amid rising energy prices and a stronger US dollar.
The market capitalization of Finnish paper products manufacturer Stora Enso added 2.8% on news about its purchase of Dutch carton manufacturer De Jong Packaging Group. The deal is worth 1.02 billion euros.
The shares of French retailer Carrefour rose by 2%.
The stocks of French financial conglomerate Societe Generale advanced by 2.6%.
Shares of Dutch manufacturer of medical equipment Koninklijke Philips NV declined by 0.2%. Earlier, the French media reported that the Paris prosecutor's office had launched an investigation into a respiratory devices recall of the Dutch company.
On Thursday, strong positive dynamics of Wall Street the day before became a significant upward factor for European stock indices. On Wednesday, the Dow Jones Industrial Average closed the trading session with a 1.4% increase, breaking a seven-day sequence of permanent decline.
