European markets, data, earnings, U.S. Fed

LONDON — European stocks closed lower on Wednesday as investors digested a profit warning from Credit Suisse and looked ahead to the European Central Bank’s policy decision and a U.S. inflation reading.

The pan-European Stoxx 600 provisionally ended 0.7% lower, with insurance stocks shedding 1.6% to lead losses. Retail stocks bucked the downward trend to add 2%.

Credit Suisse shares fell nearly 7% in early morning deals after the embattled lender warned that it is likely to post a group-wide loss for the second quarter on the back of the war in Ukraine and rising interest rates. Shares of the bank ended the session in positive territory, however.

Danish shipping giant AP Moeller-Maersk fell 8% as an easing of supply chain restrictions is expected to soften container rates.

At the bottom of the Stoxx 600, Wizz Air shares slumped 9.3% after the Hungarian low-cost airline posted a widened pretax loss for 2022 and bleak forward guidance.

Toward the top of the European blue chip index, tech investment company Prosus jumped 7.7% to track gains for Chinese tech titan Tencent, in which it has a substantial stake.

“Equities are seeking to strike a fragile equilibrium between hope that inflation is peaking and fear of a slowing economy.”

Emmanuel Cau

Head of European Equity Strategy, Barclays

International markets have pulled back this week amid nervousness over forthcoming U.S. data releases this week, including the latest inflation reading on Friday.

May’s consumer price index in the U.S. is expected to be just slightly cooler than April, and some economists are expecting it could confirm that inflation has peaked.

The University of Michigan consumer sentiment index, also due Friday, will also be closely watched by investors.

Investors are also looking ahead to the ECB’s monetary policy announcement on Thursday, with policymakers expected to confirm intentions to raise interest rates in July.

“Equities are seeking to strike a fragile equilibrium between hope that inflation is peaking and fear of a slowing economy,” Emmanuel Cau, head of European equity strategy at Barclays, said in a note Wednesday.

“Arguably, neither equities nor fixed income are priced for perfection any more, while weaker growth and softer inflation expectations may come as a silver lining for both, if they bring more prudent Fed communication. But without evidence of a decisive drop in inflation, a central bank put strike still feels distant, and until the broad implications of tighter policy become clearer, markets may stay on edge.”

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Shares in Asia-Pacific rose in Wednesday trade, with Hong Kong’s Hang Seng index leading gains as Chinese tech stocks listed in the city soared.

Meanwhile, U.S. stocks were mixed after two consecutive days of gains on Wall Street.

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