Europe close: Stocks slip ahead of Nvidia results, Fed minutes

22nd May 2024 17:21

(Sharecast News) - European stocks were weaker on Wednesday as investors mulled the latest UK inflation data and looked ahead to quarterly earnings from US chip giant Nvidia.

The benchmark Stoxx 600 index was down 0.34% at 521.18, while France's CAC 40 was off 0.61% to 8,092.11 and Germany's Dax was 0.25% lower to 18,680,20.

Figures released earlier by the Office for National Statistics showed that consumer price inflation dropped to 2.3% in April from 3.2% the month before, hitting its lowest level since July 2021 and edging closer to the Bank of England's 2% target. However, it was above the 2.1% expected.

Paul Dales, chief UK economist at Capital Economics, said the smaller-than-expected fall in CPI inflation makes a June rate cut by the BoE unlikely and casts some doubt over August too.

Later on Wednesday, chipmaker Nvidia reports quarterly results after Wall Street closes. The company is largely seen as the poster child for the massive surge in US equity markets so far this year, as investors continue to pour into names in the AI space. However, having gained 20% over the past month and by 98% year-to-date, Nvidia has a lot to live up to.

Joshua Mahony, chief market analyst at Scope Markets, said: "Today looks to be dominated by Nvidia earnings, with the tech Titan representing the final 'Magnificent seven' stock to report their first quarter earnings.

"Coming off the back of a year that saw Nvidia earnings triple and revenues double, the concern for markets revolve around the longevity of this incredible pace of growth. With the fourth quarter having seen a whopping 16% gain after smashing estimates across the board, history would indicate that we could be in for plenty of fireworks given the hefty 5% weighting this company has in the S&P 500."

Investors were also eyeing the latest minutes from the Federal Reserve after the close for clues as to the US central bank's thinking earlier this month.

"Notably, the FOMC meeting took place three weeks ago, and plenty has happened in the weeks between," Mahony said.

"With weak payrolls, rising unemployment, stagnant retail sales, elevated unemployment claims, and declining inflation, we have seen plenty of optimism that the Fed may feel the need to act swiftly.

"However, the elevated nature of US inflation continues to pose a major risk for markets, and today's minutes provide an opportunity to gauge just how committed the Fed are to driving prices back down to target before easing monetary conditions."

In corporate news, RS Group tumbled after saying that annual profits dropped by a quarter. The industrial and electrical products provider - formerly Electrocomponents - pinned the blame on weakness in global industrial production and the unwinding of unusual post-pandemic trading tailwinds.

Marks & Spencer surged as the British retailer reinstated its dividend and posted a jump in full-year sales and profits as the retailer's turnaround efforts bore fruit.

Swedish paper group Billerud rose after the company said it was scrapping plans to convert its Escanaba paper mill to produce cartonboard due to financial considerations.

Dutch engineer Aalberts declined 4% after reporting a drop in organic revenues over the first four months of 2024, as strength in the industrial tech division was offset by weakness in building technology.

In terms of sector, autos were among the worst performers following a report suggesting that China could potentially impose higher tariffs on cars.

A government-affiliated auto research body expert told China's Global Times newspaper that the country should raise its import tariffs on large gasoline-powered cars to 25%. The Stoxx 600 autos and parts index was down 1.9% at 655.17.