by Diana Mandia

(Reuters) – European stocks ended lower on Wednesday as several recent indicators and the announcement of extended oil production cuts by Saudi Arabia and Russia raised fears of more persistent than expected inflation.

In Paris, the CAC 40 ended down 0.84% ​​at 7,194.09 points. The British Footsie lost 0.16% and the German Dax 0.19%.

The EuroStoxx 50 index for its part dropped 0.69%, the FTSEurofirst 300 fell 0.57% and the Stoxx 600 0.56%, showing its sixth consecutive session of decline.

Sentiment remains subdued after Russia and Saudi Arabia decided to continue cutting oil output, rekindling inflation fears at a sensitive time when the market was betting on the possibility of a pause in the monetary tightening cycle of the European Central Bank (ECB) next week.

Further signs of weakness in the Chinese and European economies are also weighing on market sentiment, with investors wondering how long major central banks will keep interest rates high to curb inflation without hurting the economy.

Klaas Knot, a member of the Governing Council of the European Central Bank (ECB), said on Wednesday, quoted by Bloomberg, that the markets could underestimate the probability of a new round of tightening and that the inflation target of 2% set by Frankfurt for the end of 2025 was “the bare minimum”.

In the UK, the Bank of England (BoE) is “much closer” to the end of its cycle of interest rate hikes but borrowing costs may need to rise further due to lingering inflationary pressures, it said. said its governor Andrew Bailey on Wednesday.

For its part, the Bank of Canada (BoC) kept its main interest rate unchanged on Wednesday at 5%, evoking a period of weaker economic growth.

The European banking sector recorded a loss of 1.48% on Wednesday, its lowest level in eight weeks.

The personal and household goods sector, for its part, ended down 2.13%, with some major luxury players, battered by fears about the Chinese economy, being at the origin of this downward momentum: Moncler thus lost 4.9%, Burberry 4.7%, Kering 2.3%, LVMH 3.6%.

The telecom compartment, on the other hand, rose by 0.12%, supported in particular by Telefonica (+0.2%) after the Saudi group STC acquired a 9.9% stake in the former Spanish public monopoly.

AT WALL STREET

At closing time in Europe, the Dow Jones lost 0.58%, the Standard & Poor’s 500 0.80% and the Nasdaq Composite 1.09%.

Apple fell about 3% after the Wall Street Journal reported that China banned officials from using iPhones for work.

THE INDICATORS OF THE DAY

In further evidence of slowing growth, investors learned on Wednesday that German factory orders and eurozone retail sales fell more than expected in July.

In the United States, the growth of activity in the services sector accelerated in August, shows the monthly survey of the Institute for Supply Management (ISM) published on Wednesday, which also signals a solidity of new orders and prices of higher inputs.

CHANGES

The dollar hit a six-month high on Wednesday after data from the U.S. ISM services index showed lingering inflationary pressure.

The dollar thus gained 0.1% against a basket of benchmark currencies and the euro lost 0.09% to 1.071 dollars.

RATE

Yields in Europe rose on Wednesday on inflation fears.

The German ten-year yield took almost 5 bp to 2.65%, while that of the two-year rate gained more than 8 points to 3.12%.

US bond markets also rose after the release of the ISM services index.

The ten-year Treasury yield thus rose 3 basis points to 4.2975%, while the two-year rate took 6 points to 5.02%.

OIL

Oil prices are up slightly on Wednesday after falling earlier in the day. They had risen more than 1% on Tuesday, following the announcement of supply cuts by Saudi Arabia and Russia.

Brent rose 0.31% to 90.24 dollars a barrel and American light crude (West Texas Intermediate, WTI) gained 0.55% to 87.1 dollars.

(Written by Diana Mandiá, edited by Blandine Hénault)

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