Europe close: Stocks trim gains after US GDP data and Swedish rate hike

European stocks closed in positive territory but off the day’s highs as first-quarter US GDP unexpectedly contracted and Sweden’s central bank unveiled a surprise interest rate hike.

The pan-European Stoxx 600 index closed 0.62% higher, after rising 1.25% in morning trade as investors digested a further decline in earnings and corporate news.

Data from the US Commerce Department revealed the economy unexpectedly contracted in the first quarter as strong consumer and business spending was offset by a soaring trade deficit, slower inventory build and lower public spending.

Gross domestic product contracted 1.4% year-on-year in the three months to March 31, down sharply from the 6.9% rise recorded in the last quarter of 2021.

It was the first weakening of the economy since mid-2020 at the height of the Covid-19 pandemic and lockdowns.

“Two consecutive quarters of negative growth defines a technical recession. Keep in mind that the Russian invasion happened more than halfway through the first quarter, so if the first three months saw a negative reading, that doesn’t bode well. nothing good for the second quarter,” he added. said David Madden, analyst at Equiti Capital.

“Despite the pullback, the US Dollar is still up 0.5% on the day, which says a lot about the strength of the currency. In light of the -1.4% growth report, the Fed could seek to rein in his hawkish commentary because negative growth and higher borrowing costs are not a good combination.”

In Sweden, the central bank raised a key rate from zero to 0.25%, citing the highest level of inflation since the 1990s.

The Riksbank said there had been “unusually large fluctuations in inflation in Sweden” and that last year’s rise “was largely due to rapid increases in energy prices”. The consumer price index for March was 6.1%.

“Year-to-date, non-energy inflation has also risen rapidly and was significantly above the Riksbank’s forecast in February,” the central bank said in a statement. “The results indicate that the recovery is now broad and that the prices of goods and food and services are rising unusually fast.

In a day rich in results, the actions of a specialist in banking software Temenos skyrocketed on reports that technology-focused private equity firm Thoma Bravo had approached it for a possible takeover.

Asia Focused Bank Standard charter surged as it beat quarterly profit forecasts, while Spain Sabadell Bank was also higher on positive earnings.

Evolution game shares rose as first-quarter revenue rose 38%.

German online takeaway company delivery hero fell despite being on track for positive adjusted core earnings this year.

British supermarket group Sainsbury’s fell after warning of lower profits as higher inflation and a cost-of-living crisis would hit consumer spending.

inchcape Shares rose as the car dealer reported a strong start to the year as strong demand continued to outpace supply.

Latin American-focused telecommunications company Millicom International Cellular Shares fell as the company reported lower first-quarter earnings.

Mary I. Bruner