Business

European Stocks Close Mixed as Investors Assess Inflation, Earnings; Aegon Up 9%

Kai Pfaffenbac | Reuters
  • The pan-European Stoxx 600 provisionally closed fractionally above the flatline, with oil and gas stocks climbing 2% while health care stocks fell 1%.
  • Siemens, Thyssenkrupp, Bilfinger, Novozymes, Rabobank, Zurich Insurance, M&G, Deutsche Telekom and Aegon were among the major companies reporting earnings.

LONDON — European markets on Thursday closed mixed as investors assessed their monetary policy expectations after a cooler-than-expected U.S. inflation print, and digested a raft of corporate earnings.

The pan-European Stoxx 600 provisionally closed fractionally above the flatline, with oil and gas stocks climbing 2% while health care stocks fell 1%.

The European blue chip index closed 1% higher on Wednesday on the back of a late rally as new data showed U.S. consumer prices rose 8.5% annually in July, slowing from the previous month in large part due to a drop in oil prices. Economists had expected an 8.7% annual climb.

The easing of inflation will inform the U.S. Federal Reserve's monetary tightening trajectory ahead of its September meeting.

Nikolaj Schmidt, chief international economist at T. Rowe Price, said while the inflation release reduced the likelihood of a recession by giving the Fed some breathing space on aggressive rate hikes, last week's surprisingly strong jobs report for July does "exactly the opposite."

"On balance, it seems likely, based on the two data sets, the FOMC will shift to a pace of interest rate hikes of 50bps – which remains fast by historical measures, and which most likely will lead to a rather bumpy landing," Schmidt said in a note Thursday.

"The global economy is slowing fast. This slowdown will bring down commodity prices, as well as headline inflation and inflation expectations. The Fed will continue to tighten monetary policy until there is enough slack in the labor market where wage growth slows to a level consistent with the inflation mandate. The need to create space in the labor market raises the specter of a much harder landing."

Shares in Asia-Pacific closed higher overnight following rallies in Europe and on Wall Street. Hong Kong's tech-heavy Hang Seng index led gains as the tech sector benefited from the prospect of less aggressive interest rate hikes.

Stateside, U.S. stocks ticked higher Thursday as Wall Street looked set to build on a surge that took the S&P 500 to its highest point since early May.

It was another bumper day for corporate earnings in Europe, with Siemens, Thyssenkrupp, Bilfinger, Novozymes, Rabobank, Zurich Insurance, M&G, Deutsche Telekom and Aegon among the major companies reporting before the bell.

Aegon shares climbed more than 9% to lead the Stoxx 600 after the Dutch insurer raised its full-year guidance.

Danish pharmaceutical company ALK-Abello jumped 8% after beating second-quarter earnings expectations.

At the bottom of the index, British IT firm Netcompany fell nearly 16% after its quarterly results.

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— CNBC's Ryan Browne contributed to this report.

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