European equities edged lower Wednesday, following overnight declines on Wall Street amid rising concerns over valuations and uncertainty about the future trajectory of U.S. interest rates.
At 07:05 GMT, Germany’s DAX fell 0.2%, France’s CAC 40 slipped 0.1%, and the U.K.’s FTSE 100 eased 0.1%.
Wall Street Losses Weigh on Sentiment
Investor sentiment was dampened overnight after U.S. Federal Reserve Chair Jerome Powell warned of mounting economic risks and uncertainty around interest rates. Speaking at Rhode Island’s Greater Providence Chamber of Commerce on Tuesday, Powell described the Fed’s position as “challenging,” citing the simultaneous risks of faster-than-expected inflation and weak job growth raising questions about labor market health.
Earlier this month, the Fed cut rates for the first time this year, but Powell gave little guidance on the timing of any further monetary easing. He also noted that “equity prices are fairly highly valued,” as U.S. benchmark indices recently reached all-time highs.
With the S&P 500 up more than 13% year-to-date and Germany’s DAX over 18% higher, analysts warn of the potential for a sharp pullback.
Focus on German Ifo Business Climate
In Europe, eurozone flash PMIs released Tuesday showed business activity growing at the fastest pace in 16 months for September. However, the data also highlighted a divergence between the bloc’s largest economies: Germany saw acceleration, while France was held back by political uncertainty.
Later Wednesday, the German Ifo business climate index is expected to confirm an improvement in sentiment.
Corporate Highlights
JD Sports Fashion (LSE:JD.) reported a 13.5% fall in first-half profit, largely due to weak U.S. operations. The U.K.-based retailer maintained its full-year guidance but flagged caution over the trading environment.
Ferrari (BIT:RACE) posted a first-half EBITDA margin of 26.6%, up 20 basis points from a year earlier, as productivity gains offset higher staff and digital investment costs.
Oil Prices Gain on Inventory Decline
Crude futures rose Wednesday as a drop in U.S. inventories eased concerns about softening demand. At 03:05 ET, Brent crude advanced 0.1% to $67.72 a barrel, while West Texas Intermediate climbed 0.1% to $63.48 a barrel.
Both benchmarks gained over $1 on Tuesday after a delay in resuming exports from Iraq’s Kurdistan reduced worries about additional supply entering global markets. Data from the American Petroleum Institute showed U.S. crude stocks fell by 3.82 million barrels, while gasoline inventories dropped by 1.05 million barrels in the week ending September 19. Official U.S. government energy data is expected later Wednesday.
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