Investors fret ahead of highly anticipated US inflation data release

Low volumes and high volatility push US, European and Irish stocks lower

European and US stocks declined on Wednesday with investors on tenterhooks in advance of an all-important US inflation data update on Wednesday.

High inflation for July, following last week’s blockbuster jobs numbers will likely push the US Federal Reserve to continue with aggressive rate hikes and weigh on a recent recovery in stocks.

Buoyed mostly by interest sensitive bank stocks and commodity stocks, London’s benchmark FTSE 100 was the exception to the rule on Tuesday.

Dublin

In a weak session characterised by low trading volumes, the Irish market was down on Tuesday, mostly due to the performance of a handful of heavyweight stocks.

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The Iseq index closed 1.5 per cent weaker, anchored by the likes of Kingspan, which was down nearly 6.8 per cent to finish the session at €61.78. Paddy Power owner Flutter Entertainment was also off 2.6 per cent in advance of an earnings update on Friday.

Across Europe, weaknesses were also evident in the airline sector, with Ryanair giving back close to 1.8 per cent in the session to end the day at €12.41.

A mixed session for the banks culminated with AIB up 2 per cent to €2.26 and Bank of Ireland and Permanent TSB essentially flat at €5.90 and €1.49. Cairn Homes climbed almost 1.8 per cent to €1.14, while Kerry Group finished the session at €103.25, up 0.3 per cent.

London

Britain’s blue-chip index closed on a second consecutive two-month high in advance of Wednesday’s US inflation data release. Helped mostly by its exposure to rate-sensitive bank stocks and commodity-linked share, the FTSE 100 inched up 0.1 per cent to its highest level since June 9th.

The Bank of England will probably have to raise interest rates further from their current 14-year high to tackle inflation pressures that are gaining a foothold in Britain’s economy, Bank of England deputy governor Dave Ramsden told Reuters.

But crude oil prices boosted Shell and BP, up 1.3 per cent and 1.6 per cent respectively, while HSBC gained 1.6 per cent and Barclays was essentially flat.

After a positive month or so, retail and leisure stocks continued to give back some of their gains. Sports retailer JD Sports, among the session’s biggest losers, shed 4.3 per cent, while gambling company Entain lost 3.4 per cent.

Fund manager Abrdn — formerly Standard Life Aberdeen — led the downward charge, losing 6.5 per cent after reporting that it had swung to a first-half loss as the global downturn in markets took its toll.

Europe

European stocks were down with weaknesses observed across most sectors in low trading volumes and heightened recession anxieties.

With volumes about 40 per cent lower than the average, traders in Dublin said, the benchmark Euro Stoxx 600 gave back close to 0.6 per cent today. The German DAX index shed almost 1 per cent, while the French Cac-40 was down nearly 0.6 per cent in the session.

Shares in Europe’s biggest takeaway delivery company Just Eat continued to slide after last week’s rally, giving back more than 7.5 per cent on Tuesday. German industrial giant Siemens shed over 2.3 per cent after Monday’s disappointing earnings release.

Germany’s Continental said it expected a rise in auto production in the second half of the year as supply chains stabilise. Regardless, shares in the auto parts supplier slipped 6.5 per cent on a heavy second-quarter loss.

New York

With investors eagerly anticipating the publication on Wednesday of the July US consumer price index, tech and chip stocks bore the brunt of a sell-off on Tuesday.

The tech-heavy Nasdaq fell more than 1 per cent and five of the 11 major S&P 500 sectors fell, with consumer discretionary, information technology and communication services stocks down between 0.7 per cent and 1.5 per cent.

Chipmaker Micron tumbled 4.8 per cent after cutting its fourth-quarter revenue forecast and warning of a negative free cash flow in the following quarter as demand for chips used in personal computers and smartphones drops.

Vaccine maker Novavax slumped 28.9 per cent after it halved its annual revenue forecast. It does not expect further sales of its Covid-19 shot this year in the United States amid a global supply glut and soft demand.

Ian Curran

Ian Curran is a Business reporter with The Irish Times