Europe: Stoxx 600 hits over 3-month highs; Credit Suisse drops after flagging hefty loss

EUROPE’S Stoxx 600 index closed higher on Wednesday as gains in miners offset losses in Credit Suisse after its profit warning, while investors awaited minutes of the Federal Reserve and European Central Bank’s last policy meetings for clues on future interest rate hikes.

The continent-wide index rose 0.6 per cent to its strongest level since Aug 19. Mining stocks extended gains for a second session, rising 1.8 per cent, while travel and leisure and retailers gained 1.9 per cent and 1.7 per cent, respectively. Credit Suisse slid 6.1 per cent after the embattled Swiss lender estimated a pretax loss of up to 1.5 billion Swiss francs (S$2.18 billion) for the fourth quarter as wealthy clients make hefty withdrawals.

Surveys showed US business activity contracted for a fifth straight month in November as higher interest rates slowed demand but the downturn in euro zone business activity ebbed slightly as the world braces for a recession in 2023.

Equities rose, while government bond yields on both sides of the Atlantic dropped as data raised hopes that central banks can tame inflation and stop hiking interest rates next year.

“This contractionary and recessionary environment (in Europe) does mean price pressures are easing with weaker demand and lower energy prices all pushing inflation down. HICP could turn materially lower into the start of 2023,” said Jamie Dutta, market analyst at Vantage. The benchmark Stoxx 600 has rallied 14.6 per cent from its September closing lows, boosted by factors that included better-than-expected third-quarter corporate earnings.

The Fed’s November meeting minutes, due at 1900 GMT, will offer fresh clues on the path of interest rates. Traders see a 79 per cent chance that the US central bank will hike rates by 50 basis points in December.

The European Central Bank will release its own meeting minutes on Thursday.

In a latest flurry of comments from policymakers, Mario Centeno told Reuters the ECB should slow the pace of interest rate hikes from December and send a clear message that record 75-basis-point increases are not the norm as inflation is likely to peak this quarter.

“European equities have recently been trading at a record discount to US equities, so some bottom fishing seems logical,” Dutta added. “If we get lower inflation, stock valuations should go higher and offset softer top-line growth and elevated margin expectations.”

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Among individual stocks, EMS Chemie slipped 0.7 per cent after the Swiss nylon maker cut its full-year earnings forecast due to a worsening economic outlook. Endesa shed 5.1 per cent after the Spanish power utility forecast “disappointing” 2023-24 targets, citing high inflation and a new windfall tax in Spain. REUTERS