European Stocks Largely Lower; Joules Group Slumps

By Peter Nurse

Investing.com - European stock markets traded largely lower Friday as investors fretted about soaring inflation, tightening monetary policy, and slowing growth.

By 03:55 ET (07:55 GMT), the DAX in Germany traded 0.5% lower, the CAC 40 in France fell 0.3%, while U.K.’s FTSE 100 climbed 0.1%.

German factory gate prices rose 5.3% on the month, up 37.2% on the year, the biggest single gain since the Federal Republic started compiling its data in 1949.

Producer prices typically feed through into consumer prices with a certain time lag, and this data, from Europe’s largest economy and biggest growth driver, will add pressure on the European Central Bank to add another half-point rate hike in September, to July’s increase. This will exacerbate the risk of a regional slowdown.

Economic growth in the Eurozone for the second quarter was revised down on Wednesday to 0.6% from 0.7% quarter-on-quarter.

There was some relatively good news Friday, as retail sales in the U.K. surprisingly rose 0.3% on the month in July, but this still represented an annual drop of 3.4% as British consumers continued to struggle with soaring prices–CPI climbed over 10% in July–reining in discretionary spending.

Consumer sentiment in the U.K. slumped as the record levels of inflation caused the GfK consumer sentiment index to sink to -44 in August from July's reading of -41, which was already the lowest since the survey began.

Adding to the negative sentiment was the news that German Chancellor Olaf Scholz is set to testify later Friday over his role as Hamburg mayor in tackling a multibillion-euro tax fraud in a case that threatens to tarnish him shortly after rising to the role of the country’s political leader.

Across the Atlantic, Federal Reserve policymakers were out in force Thursday, expressing the view that further interest rate hikes were needed to tame inflation. This puts next week’s Jackson Hole symposium firmly in focus for guidance over how far the Fed intends to go in tightening monetary policy.

In corporate news, Joules Group (LON:JOUL) stock slumped 36% after the British clothing company said trading has “softened materially” since its last update, and it now expects a full-year loss “significantly below” current market expectations.

On the flip side, Kingspan (LON:KSP) stock rose 6.6% after the building materials company said it has been able to navigate “large” increases in input cost with only a little impact on its margins.

Oil prices edged lower Friday, on course for a weekly loss despite a two-day rally midweek, as concerns over a global slowdown dampening demand for crude continue to hold sway.

Data released on Wednesday showing that U.S. crude inventories fell sharply last week helped reassure traders that U.S. demand was holding up despite the high price levels, but lingering recession fears and a possible increase in output by Iran have turned the market negative.

By 03:55 ET, U.S. crude futures traded 0.4% lower at $90.14 a barrel, while the Brent contract fell 0.4% to $96.22. Both benchmark contracts were headed for weekly losses of over 2%.

Additionally, gold futures fell 0.3% to $1,766.45/oz, while EUR/USD traded largely unchanged at 1.0088.