European markets slump as BASF profit warning spooks investors

European markets declined after chemicals giant BASF’s severe profit warning over a global automotive slowdown weighed on investors.

The DAX DAX, -1.10% was the worst performing index, plunging 1.3%, while the Stoxx SXXP, -0.67%  declined 0.7% and the FTSE 100 UKX, -0.13% edged down 0.3%, continuing the soft start to the week.

What’s moving the markets?

The world’s largest chemicals company BASF BAS, -0.62% 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.

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.

ING FX strategist Francesco Pesole said: “The big theme clearly remains the strong June jobs report and the implication for the Fed’s monetary policy.

“Investors seem to have high expectations for Chair Powell’s testimony tomorrow as they attempt to assess the magnitude and timing of the coming moves.”

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 1COV, -4.40% fell more than 6% and Wacker Chemie WCH, -4.21% slid 4.2%.

Ocado OCDO, +8.54% 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 DB, -6.10% 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 DANSKE, -3.36% cut its 2019 earnings forecast due to the costs of tackling money laundering and a tough trading environment.

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