European shares fall as retail and automotive stocks go into decline

European shares fell on Wednesday ending a four-day winning streak with markets dragged down by losses in shares of German automotive company Mercedes-Benz.

A rise in the rate of inflation to 11.1 per cent in the UK and a dour forecast from US retailer Target also saw investors fret about retail stocks amid a weak outlook for consumer spending.

Dublin

The Iseq index declined 1.7 per cent in the session, continuing a topsy-turvy week, with financial stocks among the few gainers on the day.

AIB climbed 2.55 per cent to €2.97, while Bank of Ireland edged up almost 0.5 per cent to €7.58, while food group Glanbia also advanced, rising 2.4 per cent to €11.20.

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But, elsewhere, there were declines across sectors with building materials group CRH dropping 2.3 per cent to €37.76, Ryanair down 2.8 per cent at €12.77 and packaging group Smurfit Kappa ending 2.65 per cent lower at €35.21.

Kerry Group also faltered, slipping 1.2 per cent to €92.94, while insulation-maker Kingspan was 5.2 per cent lower at €57.34.

London

The FTSE 100 fell 0.3 per cent in choppy trading as weakness in mining stocks weighed on the commodity-heavy index, while hotter-than-expected inflation data highlighted a severe cost-of-living crisis and dragged the retail sector lower.

Miners fell 1.4 per cent, tracking the drop in copper prices, as weak Chinese economic data added to signs of low demand and ample supply.

Surging household energy bills and food prices pushed British inflation to a new 41-year high in October, according to data published a day before chancellor Jeremy Hunt is due to announce tax increases and spending cuts to control price growth.

The mid-cap FTSE 250 index fell 1.8 per cent, with shares of Carnival dropping 13.8 per cent after the cruise operator said it was planning a $1 billion convertible debt deal. Software company Sage Group jumped 7.3 per cent after reporting a 8 per cent rise in full-year organic operating profit.

Europe

The pan-European Stoxx 600 index closed down 1 per cent, with automotive sector stocks tumbling 3.7 per cent.

Mercedes-Benz slid 6.2 per cent after the luxury carmaker cut prices on some of its EQE and EQS models in China due to changing market demand for top-end electric vehicles (EVs).

Retailers dipped 3.4 per cent after Target forecast a surprise drop in holiday-quarter sales, blaming surging inflation and “dramatic changes” in consumer spending for a drop in demand for everything from toys to electronics.

A euro zone inflation report for October is due on Thursday.

Shares of German arms maker Rheinmetall, Italy’s Leonardo, French defence and technology group Thales, Sweden’s Saab and Britain’s biggest defence company BAE Systems rose between 0.2 per cent and 4.2 per cent.

MediaForEurope (MFE) dropped 4.1 per cent after Italy’s top commercial broadcaster’s operating profit slumped 65 per cent in the first nine months. Alstom gained 7.2 per cent after the French train maker reported strong first-half orders.

US

The S&P 500 and Nasdaq fell in early trading as Target’s disappointing sales forecast unleashed fresh worries for retailers heading into the crucial holiday season.

Target tumbled as much as 16.9 per cent as a pullback in consumer spending, despite heavy discounting, also hurt its third-quarter profit, which missed market expectations. Its bleak forecast jolted the retail sector, with shares of Macy’s, Best Buy and Dollar Tree dropping between 1.4 per cent and 6 per cent.

Despite the sales warning from Target, the latest US retail sales data suggested that consumer spending remained stable and could help to underpin the economy in the fourth quarter.

Elsewhere, home improvement retailer Lowe’s jumped 4.3 per cent after increasing its annual profit forecast, while chipmaker Micron Technology slipped 4.8 per cent after cutting its 2023 forecast for supply of its memory chips. – Additional reporting: Reuters