Europe: Orsted drags shares lower; Gabon-exposed stocks slide

EUROPEAN shares fell on Wednesday as Denmark’s Orsted led a decline in utilities and euro zone bond yields rose on bets of a September European Central Bank rate hike, while Gabon-exposed stocks slid after a military coup in the country.

The pan-European Stoxx 600 closed 0.2 per cent lower, after earlier gaining as much as 0.3 per cent to a hit a three-week intraday high.

Euro zone bond yields rose as traders leaned towards a 25-basis-point rate hike from the ECB in September, before paring gains after softer-than-expected US data.

Preliminary data showed Germany’s August consumer price inflation rose by an annual 6.4 per cent, slipping from July’s 6.5 per cent but topping a 6.3 per cent forecast.

Germany’s DAX slipped 0.2 per cent.

With inflation in both Germany and Spain coming in higher than expected, all eyes, including the ECB’s, will be on the euro zone inflation print on Thursday.

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Chancellor Olaf Scholz noted Germany’s government must be careful to not spur inflation, shortly after approving 32-billion euros (S$47.2 billion) of corporate tax cuts to boost flagging growth.

“Euro zone inflation is still high, so it would make sense that the ECB could do another rate hike,” said Michael Field, European equity strategist at Morningstar.

“But can the economy survive the hikes and is it worth the outcome rather than just accepting inflation might be naturally higher for the next couple of years as well.”

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Despite dodging its worst monthly performance this year after a recent modest rebound, the Stoxx 600 remains on track for its steepest one-month fall since May, bruised by concerns over policy tightening and a worsening economic outlook for the euro zone and top export market China.

Denmark’s benchmark index dropped 1.6 per cent on Wednesday as offshore wind farm developer Orsted slid by a record 24.8 per cent after saying it expects US impairments of 16 billion Danish crowns (S$3.1 billion).

Peers Siemens Energy and RWE lost 3.3 per cent and 4.7 per cent, respectively, with the broader utilities sector down 1.9 per cent.

London-listed oil producer Tullow Oil, French energy companies TotalEnergies Gabon and Maurel et Prom, and miner Eramet all dropped between 6.6 per cent and 16.5 per cent after a military coup raised concerns over their operations in Gabon.

Meanwhile, the UK’s FTSE 100 was the only major index to end in positive territory, edging up 0.1 per cent, with a boost from homebuilders and as Asia-focused Prudential rose 1.5 per cent on higher first-half operating profit.

Germany’s Delivery Hero fell 10.3 per cent with an analyst pointing to a higher-than-expected net loss in its full H1 report.

Meanwhile, Italy’s luxury fashion brand Brunello Cucinelli jumped 6.7 per cent after it lifted its full-year sales guidance for the third time this year. REUTERS