European stock markets presented a mixed picture on Tuesday, as investors carefully assessed the latest labor market data from the UK and the surging inflation in Spain. This analysis comes in anticipation of the European Central Bank’s forthcoming policy-setting meeting later this week.
As of 03:55 ET (07:55 GMT), the DAX index in Germany experienced a 0.2% decline, while the CAC 40 in France saw a 0.1% decrease. In contrast, the FTSE 100 in the UK demonstrated a 0.4% increase.
UK Labor Market Faces Increasing Strain
Newly released data from earlier in the day indicated that the UK’s unemployment rate rose from 4.2% to 4.3% in July, while the claimant count in August increased by a modest 900 individuals. Despite these signs of a weakening labor market in the UK, average earnings managed to rise by 7.8%. This suggests that the Bank of England may still need to address wage-based inflationary pressures during its upcoming meeting next week.
Catherine Mann, a policymaker at the Bank of England, issued a cautionary statement on Monday, indicating that it is too early to discontinue rate hikes. Consequently, there is widespread anticipation that the central bank will opt for another 25-basis point increase.
Surge in Spanish Inflation
Preceding the Bank of England’s meeting, the European Central Bank is preparing to convene later in the week. This meeting is characterized by substantial uncertainty regarding its outcome, given the persistently high price pressures coupled with a marked deceleration in economic activity.
The most recent data on Spanish inflation indicates a 2.6% year-on-year increase in consumer prices throughout August, primarily driven by heightened fuel costs. This marked an increase from the 2.3% rise recorded in the 12 months ending in July. These figures align with the preliminary estimate released two weeks ago.
In more favorable news, German wholesale prices experienced their fifth consecutive monthly decline in August, falling by 2.7% when compared to the same month in the prior year.
US Inflation Data in Focus
The United States will also feature inflation data this week, with the August consumer price index scheduled for release on Wednesday. Although the Federal Reserve is widely expected to abstain from another rate hike next week, policymakers will be closely monitoring the inflation figures, particularly the anticipated decline to 4.3% growth on an annual basis in the core Consumer Price Index.
Corporate Developments
In corporate news, Associated British Foods (LON:ABF) saw its stock rise by 1.1% following the company’s decision to raise its full-year profit outlook for the second time in four months. This positive outlook is supported by strong performance in its fast-fashion clothing and food operations, primarily anchored by its ownership of Primark.
Conversely, shares of Smurfit Kappa (LON:SKG) experienced an 8% decline after the terms of the merger deal were unveiled between the Irish company and its US counterpart, WestRock (NYSE:WRK). This merger aims to establish a dominant presence in the global packaging industry, to be known as Smurfit WestRock.
Crude Oil Continues to Strengthen Ahead of OPEC Report
Oil prices displayed an upward trajectory on Tuesday, sustaining the optimistic sentiment driven by Saudi Arabia and Russia’s extension of voluntary supply cuts until the end of the year. This extension comes in anticipation of the monthly report from the Organization of Petroleum Exporting Countries (OPEC), scheduled for later in the day. Market participants are especially interested in OPEC’s forecasts for Chinese demand, considering diminishing expectations that China will lead to record-high oil demand this year.
Further insights into US crude stocks will be provided by the American Petroleum Institute later in the session, with expectations leaning toward a continuation of the recent trend of reductions.
As of 03:55 ET, US crude futures advanced by 0.2% to reach $87.47 per barrel, while the Brent contract registered a 0.1% increase, reaching $90.73. Brent continues to trade above the $90 per barrel threshold after achieving this milestone last week for the first time in 10 months.
Additionally, gold futures experienced a 0.3% decline, settling at $1,941.85 per ounce, while the EUR/USD currency pair exhibited a 0.3% decrease, trading at 1.0715.
