European Equity Benchmarks Close Sharply Lower; Mining, Automotive, Bank Stocks Saddle Markets

The broad-based major European indices closed lower in Wednesday trading as mining, automotive and bank stocks burdened the markets

In economic news, the UK’s consumer prices index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.3% in July, unchanged from June 2018, while the consumer prices index (CPI) 12-month rate was 2.5% for the month, up from 2.4% in June, according to the Office for National Statistics (ONS).

Rising prices for computer games and transport fares were the largest upward contributors to the 12-month rate between June and July, although computer game prices tend to be highly variable from month to month, said the ONS.

The upward effects were offset by falling prices for clothing and footwear, and the removal of initial charges for investment in some unit trusts. Prices for clothing and footwear declined 0.4% for the 12 months to July, the first time the 12-month rate has been negative since October 2016.

Meanwhile, the headline rate of inflation for goods leaving the factory gate (output prices) was 3.1% on the year to July, down from 3.3% in June. Prices for materials and fuels (input prices) rose 10.9% on the year to July, up from 10.3% in June.

All product groups provided upward contributions to output annual inflation, with the largest coming from petroleum products. Input annual inflation increased for the fifth consecutive month, with crude oil providing the largest upward contribution to the annual and monthly rate.

The ONS also reported that average house prices in the UK increased 3% in the year to June, down from 3.5% in May, which is its lowest annual rate since August 2013 when it was also 3%. This slowdown in UK house price growth over the past two years was attributed mainly to a slowdown in the south and east of England. The lowest annual growth was in London, where prices decreased 0.7% over the year, down from negative 0.2%.

And in Germany, 5.6 million people worked in local units of manufacturing with 50 or more people employed in the country at the end of June, according to the Federal Statistical Office (Destatis). On the basis of provisional results, that was an increase of approximately 144,000 people, or 2.6% compared to June 2017. The number of hours worked in June increased 5.7% from a year earlier, reaching 723 million. The earnings amounted to EUR26 billion ($29.4 billion), which was 4.6% more than in June 2017.

In equities, mining stocks weighed down the FTSE in London, occupying the top eight spots for decliners, led by Fresnillo, and Anglo American, which shed 7.8% and 6.2% respectively, followed by Glencore and Antofagasta, which were down 5.7% each, and Evraz and Randgold Resources which were off 5.5% and 5.4% respectively.

In Frankfurt, industrial group Thyssenkrupp, and pharmaceutical company Bayer led the DAX sharply lower, falling 3.9% and 3.6% respectively, followed by semiconductor company Infineon Technologies, and adhesives manufacturer Covestro, which lost 3.5% and 3.3%. Automakers Volkswagen, Daimler, and BMW dropped 3.1%, 2.5%, and 1.4% respectively, while Deutsche Bank and Commerzbank declined 2.5% and 2%.

In Paris, steel and mining company ArcelorMittal led the CAC into negative territory, falling 4.8%, followed by semiconductor company STMicroelectronics, and oilfield services company TechnipFMC, which were down 4.7% and 4.5% respectively. Auto parts supplier Valeo dropped 3.4%, while luxury goods company Louis Vuitton, and oil and gas company Total were off 3% and 2.8%.