European markets close lower as UK sees higher inflation; ASML up 8%

It could take up to 10 years for the central bank to unwind its emergency bond-buying program, the Bank of England’s executive director for markets, Andrew Hauser, told a committee.

However, he said the central bank was now sufficiently confident in the gilt market to set out its tightening program, Reuters reported.

The BOE had already confirmed in a statement that it would begin selling assets held under its £838 billion ($944 billion) asset purchase facility on Nov. 1, a day after the government announces its new budget.

Hauser also described the chaos in bond markets sparked by Liz Truss’s tax-slashing budget as a “full-scale liquidation event” for pension funds.

Gilt yields have fallen after the budget caused them to spike, due to a combination of BOE intervention and a reversal in government policy, but remain higher than their pre-budget level.

— Jenni Reid

Shares of French-German lab supply maker Sartorius fell 17% after it said full-year sales would be in the lower half of its target range, with pandemic-fueled demand for its products now lower.

“We are specifying our full-year outlook for 2022 within the range projected so far, but the global political and economic uncertainties remain high,” said Chief Executive Joachim Kreuzburg.

Carlsberg owner Unibrew dropped 13% as it also warned of “significant uncertainty in our business environment.”

The Danish company yesterday reported 12% revenue growth but a 24% fall in profit for the third quarter.

— Jenni Reid

Shares of health care firm Fresenius jumped 11% in early afternoon trading after Bloomberg reported activist investor Elliott Management would invest in the company.

Gains dropped to 7.3% within 30 minutes of the news.

— Hannah Ward-Glenton

ASML’s third quarter earnings were a relief for investors.

Revenue for the third quarter of 2022 came in at 5.77 billon euros ($5.6 billion), beating analysts’ forecast of 5.41 billion euros, according to Reuters. That was a 10% year-on-year rise. Net profit came in at 1.7 billion euros above what the market forecast.

It has been a rough year for chip stocks, which have had to contend with high inflation and a weakening global economy as the chip boom comes to an end.

Companies including Samsung and Micron are feeling the effects of weaker demand.

ASML shares are down around 40% this year as investor fear has spread across chip-related stocks.

But ASML’s strong earnings have allayed some of those fears as the Dutch firm remained resilient in the third quarter.

Shares of ASML rose around 6% in early trade in Europe and rose to 8% before midday.

ASML sells $200 million extreme ultraviolet lithography machines to semiconductor manufacturers like Taiwan’s TSMC, which are required to make the most advanced chips. It is the only company in the world making such machines, giving it a sort of monopoly on this part of the supply chain and making it one of the most important firms in the semiconductor industry.

— Arjun Kharpal

Bonds are now more appealing for the short and long term, Giulio Renzi-Ricci, head of portfolio construction Europe at Vanguard told CNBC’s “Squawk Box Europe.”

Renzi-Ricci unpacked the appeal of government and corporate bonds amid higher yields and continuing equity volatility.

— Jenni Reid

Benefits in the U.K. are set to be 6% below their pre-pandemic value in 2023 as inflation hits 10.1%, the Institute for Fiscal Studies said.

If the government increases the rate of state support for poorer individuals and families in line with inflation, as is typical, most working-age benefits claimants will receive around £500 ($564) less per year, according to the IFS.

“The situation for benefit recipients’ living standards next April could be even more difficult depending on the design of the energy support package in place from next April,” said Heidi Karjalainen, a research economist at IFS.

— Hannah Ward-Glenton

The last couple of weeks have put a “competence risk premium” into the financial markets, Paul Donovan, chief economist at UBS Wealth Management, said on CNBC’s “Squawk Box Europe.”

“Financial markets have judged the U.K. government to not be as competent as it could’ve been,” Donovan said.

Chipmaker ASML is up 7% at 9.20 a.m. London time after beating profit expectations and reporting record new bookings in the third quarter.

— Hannah Ward-Glenton

Shares of chip firm ASML are up 5.3% following positive third-quarter earnings. Sales were better than expected and the company said it did not expect to be majorly affected by U.S. sanctions on China.

Sartorius Stedim shares have fallen 13.6% following the biotech company’s nine-month results for 2022. A prompt normalization in demand after the height of the pandemic delivered double-digit sales revenue.

— Hannah Ward-Glenton

European markets are heading for a higher open on Wednesday, looking to build on gains in the previous session.

The U.K.’s FTSE index is expected to open 17 points higher at 6,960, the German DAX up 29 points at 12,824 and the French CAC up 12 points at 6,090, according to data from IG.

The consumer price index rose 10.1% in September, according to the Office for National Statistics.

Reuters had forecast an increase of 10%.

Increased food, energy and transport prices drove the inflation hike.

— Hannah Ward-Glenton

Shares of Apple suppliers in Asia slipped after the tech firm reportedly asked a manufacturer in China to halt the production of an iPhone 14 Plus component as Apple re-evaluates demand for the product.

The Information reported that two other suppliers that assemble modules from that component have also cut production dramatically.

LG Innotek and SK Hynix in South Korea lost around 2%, while Japan’s TDK Corporation and Murata Manufacturing shed more than 1% each.

Apple’s stock briefly lost $4 per share overnight, but closed the regular session 0.94% higher as major indexes gained.

— Abigail Ng

It’s been a choppy year for gold, with the precious metal “torn between growth and inflation risks and higher real rates and the strong dollar,” Goldman analysts wrote in an Oct. 11 note.

“In our view, there remains a lot of uncertainty around the future path of U.S. inflation, growth, rates and the central bank (CB)’s reaction functions.”

Goldman ran four different economic scenarios, and predicted where gold prices could end up in each case.

CNBC Pro subscribers can read more here.

Futures of West Texas Intermediate crude moved up around $1, or 1.33% and futures of Brent crude rose $0.83, or 0.92% as the Biden administration is expected to release more oil from the U.S. Strategic Petroleum Reserve.

The plan could be announced as early as Wednesday, sources told CNBC.

The move aims to extend the current SPR delivery program, which began this spring, through December, the sources said.

–Kayla Tausche, Jihye Lee

The Fed is widely expected to hike by another three-quarters of a percentage point next month, but the central bank may be reaching its limit for dictating long-term interest rates, according to The Leuthold Group’s Jim Paulsen.

“There is considerable precedent in past tightening cycles for the Fed to be shut down by the bond market “blinking” first. The Fed may soon attempt to raise the funds rate to 4%, 4.5%, or even 5%. But at some point, longer-term bonds may simply stop rising and refuse to follow the Fed’s lead,” Paulsen wrote in a note to clients on Tuesday.

The 10-year Treasury yield has traded above 4% in recent days, reaching its highest levels in more than a decade. With growing concern about a recession in 2023, it may be close to a ceiling, Paulsen said.

“Each time the Fed further tightens monetary policy, recession fears are elevated relative to inflation fears. Ultimately, as the Fed becomes more and more aggressive, recession becomes a bigger worry than inflation, and bond buyers begin outnumbering bond sellers—that is, the bond market blinks,” Paulsen added.

— Jesse Pound

European markets are heading for a higher open on Wednesday, looking to build on gains in the previous session.

The U.K.’s FTSE index is expected to open 38 points higher at 6,958 , the German DAX up 99 points at 12,864 and the French CAC up 39 points at 6,106, according to data from IG.

European markets closed higher Tuesday as the region felt the impact of the U.K.’s fiscal U-turns and anticipated new EU measures to tackle energy prices.

The British pound was 0.5% lower against the dollar at $1.1353 at 4:30 p.m. in London, after rallying Monday as new Finance Minister Jeremy Hunt scrapped most of Prime Minister Liz Truss’ fiscal policies. Truss apologized for the “mistakes” she made in her first six weeks in the position.

On the data front in Europe, U.K. inflation figures for September are due. Earnings come from Nestle, Handelsbanken, Deutsche Boerse, Metro Bank, ASOS and BHP.

— Holly Ellyatt