Fears of a worldwide economic downturn fueled by poor Chinese economic data and numbers indicating a decrease in industrial activity in the euro zone were mitigated by a rise in banking equities following HSBC’s good earnings on Monday.
The pan-European STOXX 600 index increased 0.2% in turbulent trading. [MKTS/GLOB]
The largest contributor to the index was London-listed HSBC, which rose 5.7% after reporting a profit that above forecasts. In addition, the corporation opposed a request by major stakeholder Ping An Insurance Group Co of China to separate the lender, stating that such a move would be expensive.
The banking index increased by 1.9%.
“The first increase in interest rates provided a bit of a lift to the banking sector,” said Stuart Cole, the chief macroeconomist at Equiti Capital. “However, the challenge for the banking sector will arise when the anticipated economic downturn occurs,” he said.
European markets achieved their greatest monthly return since November 2020 on Friday, helped by robust profits from European corporations, even as wider confidence remained weak due to economic slowdown worries.
Data released on Monday indicated that industrial output in the euro zone declined last month, with manufacturers being obliged to store unsold items as a result of sluggish demand.
“The image being portrayed of the EU is becoming increasingly dismal, and a closer look at the figures reveals weaker sales, dropping rates of new orders and exports, and significant increases in inventories,” said Cole.
“It must be anticipated that manufacturers will reduce output more in the future.”
As a result of inflation, the Ukraine crisis, and the pandemic, shops in Germany, the economic powerhouse of Europe, had the greatest year-on-year sales decline in over three decades as the first half of 2022 came to a close.
Heineken (OTC:HEINY) NV fell 0.9% after the world’s second-largest brewer lowered its profit margin estimate for 2023 due to rising expenses.