European stocks struggle, as inflation hits decade high and miners hit by UBS downgrades
European stocks struggled on Friday, with the key indicator barely clinging to a weekly gain, data showing a surge in inflation for the eurozone, and miners were pressured amid the bleak outlook for the euro area. ‘UBS for iron ore.
The Stoxx Europe 600 SXXP index,
was stable at 466.36, and was not looking for any change over the week. The German DAX DAX,
was down 0.1%, the CAC 40 PX1,
rose around 0.3%, while the FTSE 100 UKX index,
was flat. The euro EURUSD,
gained 0.2% to $ 1.1784.
New data showed EU annual inflation climbed to 3% in August, from 2.2% in July – confirming Eurostat’s initial estimate – with almost half due to rising prices energy, followed by the costs of non-energy industrial goods, food, alcohol and tobacco, and services. Inflation is now at its highest for 10 years.
“Lately, soaring prices for natural gas and electricity have further fueled ‘stagflation’
fears in the market, ”said Aila Muhr, senior euro area analyst at Dankse Bank, in a note to clients. And energy inflation is expected to remain elevated for the remainder of the year, as rising gas and electricity prices counteract falling transportation fuel inflation rates, the analyst said.
Natural gas prices in Europe and the UK have skyrocketed due to slowing supplies from Russia and a lack of wind and rain to generate renewable sources. This has triggered costly bills for consumers that governments have struggled to control.
The European Central Bank expects its 2% inflation target to be reached by 2025, indicating that interest rate hikes could occur in just over two years, the FT reported. , citing unpublished internal models. The newspaper also said chief economist Philip Lane discussed the likelihood of a rate hike by 2023 during a call with German banks this week. The ECB dismissed the report in a comment to the FT.
Mining stocks were under pressure, with Anglo American AAL,
shares down 4%, after UBS cut the miner to sell, with Vale VALE,
and Fortescue Metals Group FMG,
which fell 11% in Australian trade. UBS also kept a sell note on Rio Tinto RIO,
and a neutral rating on BHP BHP,
UBS predicted that iron ore prices would fall below $ 100 / t by year-end, amid lower Chinese steel production and a weak housing market. Industrial metal has been under intense pressure since August.
Elsewhere, news of the case saw the actions of German pharmaceutical group Biotest BIO,
up 8% after Spanish pharmaceutical company Grifols SA announced it would pay 1.1 billion euros for the 90% stake held by Chinese Tiancheng Pharmaceutical, in a deal valuing Biotest at 1.6 billion euros ‘euros.
Travel and airline shares continued to rise on Friday, with shares of International Consolidated Airlines IAG,
at the top of the list of Stoxx 600 winners with a gain of almost 6%, with Deutsche Lufthansa LHA,
up 3% and Aéroports de Paris ADP,
up almost 3%.