US stocks dropped on Wednesday as traders braced for the Federal Reserve’s rate decision while parsing an avalanche of data that sent conflicting signals about the US economy.
The European equities index, meanwhile, held a modest gain after a report showed inflation in the euro area slowed more than economists’ expectations in January.
In advance of Thursday’s European Central Bank (ECB) meeting, the pan-European Stoxx 600 index was stable on Wednesday while the blue-chip Stoxx 50 held a modest gain.
The French CAC 40 gave back a modest 0.2 per cent, with the German Dax making a similarly sized move in the opposite direction.
Across the board, car stocks enjoyed another healthy day on Wednesday as investors continued an unexpectedly robust earnings season for the sector.
In Germany, shares in Porsche and BMW jumped by between 0.9 per cent and 1.6 per cent, while Daimler shares added as much as 2 per cent. Their French competitor Renault, meanwhile, added 2.8 per cent.
With the ECB expected to raise rates by a further half of a per cent on Thursday, bank shares felt the benefit on Wednesday. Spanish BBVA added more than 4 per cent, Swedbank was up 3.5 per cent.
Moving in the opposite direction, luxury and consumer-facing shares lagged the pack with Hermès down 1 per cent, L’Oréal down 1.9 per cent and Moët Hennessy giving back 0.7 per cent.
Buoyed by strong performances from the larger caps, Irish shares outperformed their European peers on Wednesday. The Iseq index added more than 1 per cent in trading, more than erasing Tuesday’s 0.28 slide.
Traders in Dublin said sectoral moves in the construction, building materials and industrials sectors in the UK helped lift shares in Dublin, while increasingly sunny forecasts for the Irish economy also contributed to the positive sentiment.
Insulation-maker Kingspan added more than 1.7 per cent in trading on Wednesday to close the session at €59.82. Woodies DIY and Chadwicks owner Grafton Group and building materials giant CRH added between 1.2 and 1.9 per cent to finish the day at €9.37 and €43.13 per share respectively.
After giving up 0.3 per cent on Tuesday, paper and packaging company Smurfit Kappa added almost 1.9 per cent to €39.14.
Irish bank shares also performed well in advance of the ECB’s latest rates decision on Thursday and after new data from the Banking and Payments Federation Ireland revealed that mortgage drawdowns hit a new post-crash high of €14.1 billion in 2022.
Bank of Ireland, AIB and Permanent TSB all added between 0.99 per cent and 1.8 per cent.
UK stocks edged into the red for the second day in a row, dragged lower by downward moves from mining stocks, telecoms and pharma stocks.
The FTSE 100, up 2.7 per cent in 2023, followed Tuesday’s backwards move by sinking close to 0.2 per cent on Wednesday.
Vodafone gave back more than 2 per cent after it reported a slowdown in revenue growth in quarter three from quarter two and said “we can do better”.
AstraZeneca plunged 2.9 per cent after its competitor, GSK, announced that it had beat fourth-quarter profit and sales forecasts, helped by sales of its blockbuster shingles vaccine Shingrix and unveiled an upbeat forecast for 2023.
Mining companies Rio Tinto and Anglo American sank by between 2 per cent and 2.6 per cent after the latter reported lower rough diamond sales in the fourth quarter.
Moving up the table, Entain, the betting giant behind Ladbrokes and Coral, added 1.8 per cent on Wednesday after it raised its earnings guidance following a strong final quarter of 2022.
The S&P 500 and the tech-heavy Nasdaq 100 fell on Wednesday. A report showed job openings surging, in stark contrast to US private payrolls data that came in earlier in the session, hinting at a cooling labour market.
Despite the Fed’s decision to raise rates again by another quarter of a per cent, January’s equity rally shows that stock investors are at odds with the Fed, despite chair Jerome Powell and his colleagues reinforcing that rates will remain higher for a while.
Investors also digested a raft of company earnings. Video game-maker Electronic Arts slumped more than 11 per cent after cutting its full-year forecast, while Advanced Micro Devices climbed as much as 7.8 per cent after robust earnings.
Shares in payments giant PayPal fell by close to 1 per cent after the company announced plans to shed as many as 2,000 jobs globally.