By Callum Keown
European markets declined after chemicals giant BASF’s severe profit warning over a global automotive slowdown weighed on investors.
The DAX /zigman2/quotes/210597999/delayed DX:DAX -0.23% was the worst performing index, plunging 1.3%, while the Stoxx /zigman2/quotes/210599654/delayed XX:SXXP +0.02% declined 0.7% and the FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.47% edged down 0.3%, continuing the soft start to the week.
What’s moving the markets?
The world’s largest chemicals company BASF /zigman2/quotes/204280060/delayed DE:BAS -0.93% cut its full-year profit forecast by up to 30%, blaming the trade war between the U.S. and China, and a slowdown in the automotive industry.
European chemical producers slumped following the warning, weighing down on markets across the continent.
Speaking to MarketWatch, ING Germany’s chief economist Carsten Brzeski said: “BASF’s profit warning shows that the big export-orientated German companies are starting to feel the pain.
“Over the past 12 months you could argue it was a nice bubble gradually deflating due to ongoing uncertainty but further downsizing will cost jobs and money.”
He added: “The markets are reading this as the soft indicators starting to become the hard reality.”
Bond yields were mixed, with U.S. Treasurys ticking up slightly, as markets looked toward Federal Reserve chair Jerome Powell’s testimony on Wednesday for clues on further rate cuts.
Markets anticipate a rate cut later this month, but Powell’s comments could shed light on the scale of the cut and whether another could follow in September.
The minutes of the last European Central Bank meeting will also be released later this week.
A Nikkei poll showed China’s GDP is expected to expand at its weakest pace since 1992 in the second quarter, further highlighting the impact of the continuing trade war between the world’s two largest economies.
Which stocks are active?
BASF’s profit warning hit fellow chemical producers as Covestro /zigman2/quotes/206170750/delayed XE:1COV +0.03% fell more than 6% and Wacker Chemie /zigman2/quotes/202193260/delayed XE:WCH +4.04% slid 4.2%.
Ocado /zigman2/quotes/207225647/delayed UK:OCDO +2.30% shares rose 5.6% despite losses widening in the first half of the year due to the devastating fire at its Andover warehouse. Investors were buoyed by the underlying figures as revenue rose 11% to £882.3 million.
Deutsche Bank /zigman2/quotes/203042512/composite DB -1.51% continued to fall after Germany’s largest lender began slashing jobs on Monday as it scrapped its stock-trading business. The banking sector was further hit as Danske Bank /zigman2/quotes/209678580/delayed DK:DANSKE -2.45% cut its 2019 earnings forecast due to the costs of tackling money laundering and a tough trading environment.