European shares subdued ahead of euro zone inflation data; focus on Middle East

EUROPEAN shares were muted on Thursday (Aug 13) as investors awaited euro zone inflation data following a strong earnings season, while weaker commodity prices also weighed on energy and mining shares.

The pan-European Stoxx 600 closed little changed at 659.24 points. The benchmark retreated from record highs in the previous session.

Companies in the region are on track for one of the strongest earnings seasons in years, with energy and materials sector profit boosted by elevated commodity prices driven by the Middle East conflict.

“There’s definitely a big change in the earnings picture compared to what we’ve seen in the previous years. That is a very strong driver for European equities,” said Joost Van Leenders, senior investment strategist at Van Lanschot Kempen Investment Management.

However, investor sentiment remained subdued due to uncertainty surrounding the Middle East conflict, with the US and Iran making competing claims over the control of the Strait of Hormuz - a crucial waterway for global energy supplies.

“The real problem at the moment is how to price in what’s going on in the Middle East. The market has month after month priced the war as coming to an end imminently,” said David Morrison, senior market analyst at Trade Nation.

Brent crude futures eased 0.7 per cent on Thursday, heading for their first drop in seven days as prospects of weaker global demand and an increase in US crude inventories pressured prices.

The energy sector declined 0.8 per cent, while the basic resources shares led sectoral losses with a 3 per cent fall, their steepest drop in more than a month as precious metal and copper prices weakened.

Markets are also awaiting the euro zone inflation data, due on Friday, for clues on the European Central Bank’s monetary policy path.

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Meanwhile, US producer prices were unchanged in July, data showed on Thursday. Traders scaled back their expectations of a September Fed rate-hike on Wednesday after only a mild increase in July inflation.

Limiting the losses on the Stoxx 600, the food and beverages shares and telecom shares gained 1.3 per cent and 1 per cent, respectively.

Among individual movers, Maersk rose 9.4 per cent after the Danish shipping group smashed profit forecasts and raised its full-year earnings guidance for a second time this year as the Middle East conflict and strong demand pushed freight rates higher.

Adyen was among the top gainers on the Stoxx 600, jumping 16.4 per cent after the Dutch payments firm, whose clients include Spotify and Microsoft, lifted its annual revenue growth forecast.

Swissquote tumbled 14 per cent, hitting its lowest in more than a year, after the financial and trading services provider missed first-half expectations due to weak cryptocurrency income. REUTERS