European stocks associated with energy sector observing a decline; Federal Reserve Chair Powell, significant data upcoming
The European stock market took a dip on Thursday, primarily due to slumping energy stocks, as investors anxiously awaited key economic data and remarks from U.S. Federal Reserve Chairman Jerome Powell.
In the early hours of trading, the STOXX 600 index slumped 0.2%, with the energy sector plummeting 1.7%. Most European exchanges also sagged in the red.
A potential U.S.-Iran nuclear deal and prospects of boosted oil supply contributed to the drop in oil prices, causing a two-percent decrease in major oil shares such as BP and Shell. Basic resources also stumbled, falling 1.5% due to lower metal prices.
Despite the excited response to the U.S.-China trade truce and President Trump's Middle Eastern investment deals, no announcements concerning the European Union have been made yet.
Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, explained, "There's been a slowing appetite in the European stock markets for two primary reasons. First, we're still lacking news on any U.S.-EU deals. Second, the inflation numbers haven't been favorable to the European Central Bank recently."
Investors eagerly anticipated the release of the first-quarter Eurozone flash GDP and employment data later that day. However, Powell's remarks later in the day could prove most significant, offering potential insights into the monetary policy outlook.
Market watchers also kept an eye on upcoming U.S. retail sales stats and Walmart earnings for a clearer picture of consumer sentiment.
Thyssenkrupp plummeted 10% after reporting a steep decline in its second-quarter operating profit. Shares in Siemens dropped 2.7%, attributed to a disappointing free cash flow despite second-quarter results that surpassed expectations. German pharmaceutical and specialty materials group Merck KGaA dipped 6%, citing cautious earnings guidance for 2025 due to the unfavorable macro-economic and geopolitical climate and negative foreign-exchange effects.
However, despite these corporate results, European companies generally held their ground amidst the turmoil caused by U.S. tariff policies. According to LSEG data, first-quarter earnings are projected to have risen 1.9% year-on-year.
Due to the market's hesitant performance, energy shares were hit harder, leading the overall European market pullback. Concerns surrounding earnings prospects, the economic slowdown in China, and ongoing geopolitical and regulatory uncertainties weighed on investor sentiment. This mixture resulted in selective selling pressure on energy shares and a more tentative overall equity market performance.
- In the light of unfavorable inflation numbers and the absence of U.S.-EU deals, investors are cautiously trading their stocks on the European market, with the STOXX 600 index and energy sector being particularly affected.
- As the European Central Bank keeps a close eye on the slowing appetite in the European stock markets, investors await the release of the first-quarter Eurozone flash GDP and employment data, eyeing potential insights into the monetary policy outlook given by Fed Chairman Jerome Powell.
- With the energy sector and index taking a blow, individual European companies like Thyssenkrupp, Siemens, and Merck KGaA have also felt the impact of the hesitant market performance, market uncertainties, and ongoing geopolitical issues, causing stock dips despite promising second-quarter results.
