European Markets Close Slightly Higher as Investors Digest Powell Comments

Brendan McDermid | Reuters

This is CNBC's live blog covering European markets.

European markets closed slightly higher Wednesday as U.S. Federal Reserve Chairman Jerome Powell indicated interest rates may need to go higher for longer.

The pan-European Stoxx 600 index provisionally closed up 0.12%, with sectors and major bourses pointing in opposite directions. Healthcare stocks led losses, down 0.65%, while banking stocks led increases with a 1.2% rise.

Powell spoke before the Senate Banking, Housing and Urban Affairs Committee on Tuesday and cautioned lawmakers that the central bank's terminal rate will likely be higher than previously anticipated because of stubbornly high economic data in recent weeks. Major stock indexes fell following Powell's comments.

On Wednesday, investors will be closely watching Powell continue to speak before the House Financial Services Committee.

U.S. stocks were lower in early trade, while in Asia-Pacific markets, Hong Kong shares dropped more than 2%.

European stocks close slightly higher

Europe's Stoxx 600 index provisionally closed 0.12% higher on Wednesday after trading broadly flat through most of the session.

Germany's DAX gained 0.46% and the best-performing stock was German auto parts manufacturer Continental, which reported full-year results.

The U.K's FTSE 100 was up 0.13% while France's CAC 40 slipped 0.2%.

— Jenni Reid

Stocks on the move: Continental up 7%, Admiral Group down 6%

German auto parts manufacturer Continental was the strongest performer in afternoon trade, up 7%, after it announced it expects higher earnings this year amid a "sustained market recovery."

Financial services group Admiral dropped 6% on its own results announcement, which revealed a decline in pre-tax profit from £769 million ($911 million) to £469 million. The company also said it would cut its full-year dividend by 40%.

— Jenni Reid

U.S. private payrolls increase above expectations

U.S. private payroll data from ADP showed an increase of 242,000 for the month, ahead of the Dow Jones estimate for 205,000 and above January's 119,000 rise.

ADP's chief economist, Nela Richardson, said the robust hiring shown by the figures was "good for the economy and workers," but a modest slowdown in pay increases was "unlikely to drive down inflation rapidly in the near-term."

It comes with investors monitoring U.S. economic indicators following Federal Reserve Chair Jerome Powell's speech on Tuesday, in which his key message was that rates would be higher for longer than expected. Global stock markets were driven lower by his remarks.

Powell is due to continue his congressional testimony on Wednesday.

The pan-European Stoxx 600 index was 0.05% lower at 2:15 p.m. London time, while U.S. stock markets were on course to open flat.

— Jenni Reid

Andritz CEO: Growth driven by renewables

Joachim Schönbeck, CEO at Andritz, discusses full-year earnings, and outlines areas of growth in the U.S., Europe, and emerging markets.

Adidas to slash dividend following Yeezy fallout

Adidas announced it will slash its dividend after its split with rapper Kanye West, now known as Ye, last year.

The German sportswear brand warned it could be on track for its first annual loss in three decades this year after ending its partnership with the Yeezy designer after he made antisemitic comments online.

The company will now recommend a dividend of 0.70 euros per share, down from 3.30 euros a share in 2021.

Adidas shares tanked in February after the company announced it could lose around 1.2 billion euros ($1.3 billion) in revenue this year if it is unable to sell its existing Yeezy stock.

The company is reportedly still deciding whether to repurpose the unsold footwear.

Adidas chief executive Bjorn Gulden, who was appointed in January, said there would be more collaborations in future, but they would be handled better.

"We will bring (Adidas) back to be the best sports brand in the world once again," Gulden said, as reported by Reuters.

Shares of Adidas were down 2.3% at 9.30 a.m. London time.

— Hannah Ward-Glenton

Darktrace shares down 7% after half-year results

Shares of Darktrace dropped 7% in early trade after the British cybersecurity company lowered its guidance for full-year cash flow.

During its half-year report it lowered its 2023 guidance range for free cash flow from between 60% and 65% to between 50% and 55%.

Darktrace reported a 36% increase in first-half revenue.

— Hannah Ward-Glenton

German industrial output rose more than expected in January

Industrial production in Germany rose more than expected in January, increasing by 3.5% from December. Reuters analysts had expected a 1.4% increase for the month.

Retail sales fell unexpectedly and were down 0.3%, a big move from the 2% rise forecast by Reuters analysts. The figure is an improvement on December, however, when retail sales were down 5.3%

Manufacturing output was up 1.9% on the month, while construction output was up 12.6%.

— Hannah Ward-Glenton

CNBC Pro: This ETF only invests in women-led companies — and is expected to rise 20% this year

A U.S.-listed ETF is only investing in companies that are led by women, with the belief that the "female factor" outperforms.

The ETF was created after its fund manager, who has a background in investment banking and private equity, observed that institutional barriers to female candidates for top positions have meant that those who do succeed have had to perform at a higher level, resulting in better overall performance.

The ETF is based on an index that has outperformed its benchmark by over 20% over the past five years.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Key Powell remarks for the market

There were two key quotes in the Congressional testimony of Federal Reserve Chairman Jerome Powell as far as markets were concerned.

"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell said in prepared remarks.

This means the Fed may keep raising for longer than the market anticipated. Many wanted the Fed to stop hiking soon.

"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," Powell also said.

The Fed's last hike was just a quarter point as it slowed the pace. Powell is hinting here the Fed may need to speed back up, which is a big fear of the markets.

— John Melloy

CNBC Pro: Tesla a 'screaming buy' or bellwether for zombie stocks? The bulls and bears state their case

All eyes were on Tesla last week as it held its investor day, where it unveiled its plans ahead.

The company is going all out to stoke consumer demand, continuing to cut prices and teasing a cheaper, next-generation model.

Over the year so far, Tesla shares are up around 57%, but looking ahead, analysts are divided on the company's prospects.

Here's what the bulls and the bears are saying about the world's biggest EV maker.

— Weizhen Tan

There's still a path to a soft landing, Morgan Stanley's global chief economist says

There's still a path to a soft landing in spite of Federal Reserve Chair Jerome Powell's comments suggesting rates could go higher for longer, according to Morgan Stanley's global chief economist Seth Carpenter.

Of course, there will need to be a cooling in the labor market for the Fed to meet its own inflation projections, he said in a Tuesday appearance on CNBC's "Closing Bell: Overtime."

Carpenter expects that nonfarm payrolls will need to ease below 100,000 per month to accomplish that goal. Investors are anticipating the February jobs report this week to see whether the economy is continuing to heat up, or if January's blockbuster report was an aberration.

"If we're staying at 500,000 nonfarm payrolls per month, that's clearly not doing it. We need to see it slow, get down to, say, below 100,000 per month," Carpenter said. "But if it stays positive, then I think that kind of trajectory, that's the path for a soft landing. We still think it's possible."

— Sarah Min

CNBC Pro: Strategists say it’s a stock picker’s market right now — and name their top picks

Stocks have broadly rallied from their 2022 lows this year, but veteran investor Nancy Tengler believes "there's still plenty of places" to find high-quality stocks with rising dividends and reliable earnings growth.

She says investors should be careful about where they put their money to work — a view echoed by several market pros.

Pro subscribers can read more here.

— Zavier Ong

Gundlach says the Fed is ‘very likely’ to hike rates by half point this month

DoubleLine Capital CEO Jeffrey Gundlach said it's "very likely" that the Federal Reserve will raise interest rates by half a percentage point at its next policy meeting.

"We've had a very large increase in short-term interest rates and a further inversion of the yield curve," Gundlach said Tuesday during a DoubleLine investor webcast. "We don't need the Fed. All we need is the 2-year Treasury."

The yield on the 2-year U.S. Treasury note jumped over 12 basis points to top 5% on Tuesday, reaching its highest level since 2007. The sharp move higher followed Fed Chairman Jerome Powell, who said interest rates are "likely to be higher" than previously anticipated.

The so-called bond king said the Fed funds rate has almost perfectly mirrored the 2-year Treasury yield over the years.

"It's now corroborating the idea that the Fed will probably take the Fed funds rate up to 5% at the upcoming meeting," Gundlach said.

— Yun Li

European markets: Here are the opening calls

European markets are heading for a lower open Wednesday as investors reacted to the latest comments from the Federal Reserve's Chairman Jerome Powell indicating interest rates may need to go higher for longer.

The U.K.'s FTSE 100 index is expected to open 22 points lower at 7,890, Germany's DAX 40 points lower at 15,513, France's CAC down 13 points at 7,320 and Italy's FTSE MIB down 95 points at 27,679, according to data from IG.

Data releases include revised euro zone gross domestic product figures for the fourth quarter, while earnings come from Gatwick, Adidas, Continental and Italgas.

— Holly Ellyatt

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