European stocks recover after worst sell-off in nine months

Spanish inflation rises to 13-year high

View of Paris, including the Eiffel Tower                                 
European stocks were trading up on Wednesday, led by Paris’s CAC 40 – Photo: Shutterstock

European stocks traded up on Wednesday, having experienced their worst sell-off since January on Tuesday. 

Madrid’s IBEX 35 enjoyed the smallest gain, rising by only 0.2%. The central bank of the eurozone’s fourth-largest economy stated on Wednesday that inflation is now at its highest rate (4%) in 13 years. 

Rising US Treasury yields, a strengthened US dollar, and anxiety about the health of the Chinese economy and runaway inflation all combined to push the Euro STOXX 50 and 600 2.4% and 2.2% lower, respectively. 

Both pan-European indices had traded up by mid-afternoon on Wednesday, with the Euro STOXX 50 rising by 0.62% and the 600 by 0.59%.

Other leading currencies

Having reached its highest level against the yen in a year and a half, and 2021 highs against a slew of other leading currencies, the US dollar cooled. US Treasury yields likewise cooled after multi-month highs.

However, this calming was too late to bolster investor sentiment in Asia. By Wednesday’s close, the Shanghai Composite, BSE Sensex and Korean KOSPI indices traded 1.8%, 0.4% and 1.2% lower, respectively.

The Nikkei 225 also traded down by 2.1%, despite the greater certainty afforded by Fumio Kishida’s election as leader of Japan’s ruling Liberal Democratic Party. 

Unexpected rise in eurozone sentiment

Wednesday also saw the publication of data by the European Commission (EC), which found that confidence in the eurozone improved in September, having dipped in August. 

The EC’s economic sentiment indicator rose from 117.8 in August to 117.8 in September. Having reached an all-time high of 119.0 in July, the metric was widely expected to continue to dip as immediate post-Covid enthusiasm waned and inflation concerns solidified. 

Although sentiment in the area’s services sector fell from 16.8 to 15.1, a 0.3 rise in industrial sentiment to 14.1 came as a surprise. Consumer sentiment also improved, rising from -5.3 to -4.0 in a month. 

By 15:00 (BST), all leading indices European indices had traded up, led by Paris’s CAC 40, which rose by 0.5%. 

Further reading: Tech stocks retreat on rising Treasury yields

Further reading: GBP/USD falls to 10-week low despite BoE’s hawkish intervention 

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