European shares witnessed a decline on Tuesday, with German software company SAP leading the fall following a disappointing forecast from U.S. tech firm Oracle (NYSE:ORCL). Meanwhile, investors adopted a cautious stance ahead of key U.S. inflation data and the European Central Bank’s (ECB) upcoming rate decision.
The pan-European STOXX 600 index slipped by 0.2%, notably impacted by a 0.5% dip in basic resources as the prices of most base metals retreated amid a stronger dollar.
In Germany, the DAX index faced a 0.5% setback, primarily attributed to SAP, which recorded a 1.8% decline. This drop followed Oracle’s projection of current-quarter revenue below Wall Street expectations, as challenging economic conditions weighed on business spending in the cloud sector.
An exception to the downturn was Britain’s FTSE 100, which saw a 0.4% rise. The FTSE 100 was bolstered by a weaker pound following labor market data that indicated weakening employment conditions, even as wage growth remained robust in July. This mixed data painted an uncertain picture in anticipation of the Bank of England’s interest rate decision next week.
Elizabeth Martins, senior economist at HSBC, commented, “The good news is that real pay growth is picking up, providing some relief for working households after 19 months of annual contraction … the bad news is that inflation pressures are still with us.” She also noted that rising unemployment and falling employment raised questions about the theory of labor hoarding, on which much optimism for the UK economy relies.
In Spain, national consumer prices experienced a 2.6% year-on-year increase through August. Additionally, a survey by the ZEW economic research institute revealed an unexpected improvement in German investor sentiment for September.
Money market traders began to increase their bets on another interest rate hike by the ECB in anticipation of the central bank’s monetary policy decision on Thursday.
Investors have priced in a 50% probability of the ECB raising rates by 25 basis points to 4% during Thursday’s meeting.
Furthermore, the market eagerly awaits U.S. inflation data on Wednesday, which has the potential to influence expectations regarding the peak of global interest rates.
Among notable individual movers in the European market, Airbus witnessed a 2.4% decrease after engine supplier Pratt & Whitney issued a warning about a rare manufacturing flaw that could lead to the grounding of hundreds of Airbus jets in the coming years.
Conversely, Associated British Foods (OTC:ASBFY) surged by 5.3% after the owner of Primark raised its full-year profit outlook for the second time in four months. This improvement was underpinned by strong trading in its fast-fashion clothing and food operations.
However, Ireland-based Smurfit Kappa saw a significant 10.2% decline after agreeing to merge with WestRock (NYSE:WRK), creating one of the world’s largest paper and packaging producers valued at nearly $20 billion.
HelloFresh experienced an 8.2% gain following J.P. Morgan’s inclusion of the German meal-kit maker’s stock in its analyst focus list (AFL) and positive catalyst watch.
