European stock markets witnessed a decline on Wednesday, impacted by lackluster German factory orders and the escalation of global growth concerns due to soaring oil prices.
As of 03:35 ET (07:35 GMT), Germany’s DAX index edged down by 0.3%, the FTSE 100 in the UK fell by 0.9%, and France’s CAC 40 dipped by 0.8%.
German Factory Orders Plunge in July
Data unveiled on Wednesday revealed a staggering 11.7% decline in German factory orders for July, marking a stark contrast to the prior month’s revised 7.6% increase. June’s remarkable surge had been fueled by substantial gains in the aerospace sector. Excluding these substantial orders, overall monthly industrial activity would have contracted by 2.6%.
With the significant drop in July, the industrial landscape in the Eurozone’s largest economy continues to exhibit pronounced weakness. Manufacturing data from Germany, Britain, and the Eurozone all indicated declines on Tuesday, while their service sectors entered into contraction territory.
This development compounded concerns, with a private-sector survey highlighting that China’s services activity expanded at its slowest pace in eight months during August.
Eurozone Retail Sales Outlook
Zooming out to the broader Eurozone, it is anticipated that retail sales weakened in July, reflecting the persistent consumer pressure amidst elevated inflation levels. Data set to be released later in the session is expected to show a 0.1% month-on-month decline in retail sales for July, amounting to a 1.2% annual drop.
The European Central Bank is scheduled to convene next week, and a string of soft Eurozone data has heightened expectations that the bank’s officials may opt to pause the rate-hiking cycle.
Telefonica Gains Ground Post Saudi Stake Move
In corporate news, Ashmore (LON:ASHM) shares experienced a 1% drop after the emerging markets-focused fund manager reported a 6% decline in annual profit, accompanied by a nearly one-quarter decrease in assets under management.
Conversely, Telefonica (BME:TEF) shares saw a 2.5% uptick following Saudi Arabia’s STC Group’s acquisition of a 9.9% stake in the Spanish telecom giant, positioning itself as the company’s leading shareholder.
Oil Prices Surge to Near 10-Month Highs
Compounding Europe’s concerns, oil prices surged to near 10-month highs after major producers Saudi Arabia and Russia unexpectedly extended their voluntary supply cuts through the end of the year. This decision caught traders off guard, as many had anticipated extensions only until the end of October. Consequently, global oil markets are set to undergo substantial tightening this year.
The increase in oil prices raises concerns about inflation’s impact on central bank monetary policy and its ramifications for a global economy grappling with subdued demand and a wavering Chinese economy.
As of 03:35 ET, U.S. crude futures were down by 0.4% at $86.31 per barrel, while the Brent contract dropped by 0.5% to $89.62. Both contracts remain close to their highest levels since mid-November.
Additionally, gold futures dipped by 0.2% to $1,949.00 per ounce, while EUR/USD traded 0.2% higher at 1.0739.
