Market Update
European Markets Trimmed Weekly Losses, Retail Sales Fell 8th Consecutive Month
Bridgette Randall
04 Aug, 2023
New York City
European markets attempted a rebound after three-day losses on economic worries.
Market averages in Paris, London and Frankfurt traded slightly higher in listless trading and investors reviewed retail sales data in the Euro Area and German factory orders.
Crude oil rebounded after Russia and Saudi Arabia extended voluntary production cuts by 1.3 million barrels a day in an effort to revive prices closer to $90 a barrel.
Germany Factory Orders Unexpectedly Accelerated In June
German factory orders unexpectedly rose 7% from the previous month in June, the Federal Statistics Office reported Friday.
New orders rose 3.0% from a year ago.
Orders rose for the third month in a row and increased at the fastest pace in the period, driven by large orders from the aerospace industry.
Factory orders in May were downwardly revised to an increase of 6.2%.
New orders for mechanical engineering advanced 5.1%, and orders for other vehicle construction jumped 89.2%, driven by the demand in the aerospace industry.
However, orders for motor vehicles and their parts declined 7.3% and orders for capital goods increased 9.9%, while orders for intermediate and consumer goods inched higher 2.0% and 7.7%, respectively.
Excluding large-scale orders, new orders declined 2.6%.
Meanwhile, foreign orders increased 13.5%, driven in part by orders from the Euro Area by 27.2% and orders from the rest of the world by 5.0%, but domestic orders declined 2%.
In the three-month period to June, factory orders rose only 0.2%.
Euro Area Retail Sales Declined In June
Euro area retail sales declined 0.3% from the previous month in June, Eurostat reported Friday.
Retail sales in May were revised to 0.6% in May.
On a yearly basis, seasonally adjusted retail sales declined 1.4% in June, slower than 2.4% in May and sales declined for the eighth month in a row.
Sales fell for food, drinks, tobacco 0.3% matching the rate in May, and non-food products decreased 0.2% compared to 0.6%.
However, sales for automotive fuel increased 1% from 0.5% and non-store sales by mail orders and internet increased 1.1% compared to a decrease of 1%.
In other economic news, France's industrial production fell 0.9% in June, following a revised 1.1% increase in May, France's statistical office INSEE reported Friday.
Europe Indexes & Yields
The DAX index increased 0.2% to 15,915.71, the CAC-40 index rose 0.5% to 7,297.59 and the FTSE 100 index edged higher 0.03% to 7,531.65.
For the week, the DAX index declined 3%, the CAC-40 fell 2.8% and the FTSE 100 index dropped 2.2%.
The yield on 10-year German bonds increased to 2.60%, 8rench bonds traded higher to 3.17%, the UK gilts edged up to 4.49% and Italian bonds increased to 4.29%.
The euro edged lower to $1.091, the British pound to $1.271 and the U.S. dollar fetched 87.75 Swiss cents.
Brent crude increased $0.41 to $85.56 a barrel and the Dutch TTF natural gas increased €1.47 to €29.01 per MWh.
Europe Stock Movers
Credit Agricole SA increased 6.4% to €11.90 after the French lender reported better-than-expected earnings in the second quarter, driven by consumer lending and insurance demand.
BNP Paribas SA jumped 1.5% to €59.18 after the French lender announced a stock buyback plan.
Sika AG decreased 0.5% to CHF 266.90 despite the Swiss chemical company revised higher 2023 sales outlook.
Deutsche Wohnen SE increased 0.6% to €22.42 after the company said it is reviewing the possibilities of selling its portfolio of nursing care properties.
Commerzbank AG declined 1.7% to €10.78 despite the German lender revising higher its net interest margin and 2023 earnings outlook.
WPP Plc declined 6.4% to 792.96 pence after the UK-based advertising group lowered its sales outlook for the year.
Market Averages Declined Second Day After U.S. Treasury Yields Jumped to 9-month Highs
Barry Adams
03 Aug, 2023
New York City
The pop in Treasury bond yields overshadowed sentiment in stock markets and investors reviewed a fresh batch of earnings.
Market indexes drifted lower for the second day following the U.S. long-term debt rating downgrade.
DoorDash, PayPal, Etsy, Shopify, Cummins and Qualcomm were among the leading companies reporting earnings and about 600 companies are expected to release earnings before the end of the week.
Stocks have been under pressure after Fitch Ratings cut the U.S. long term debt rating by one notch citing expected "fiscal deterioration" over the next three years as the U.S. government ramps up borrowing.
Treasury yields spiked to the levels last seen in November as bond traders worry that the Fed will struggle to bring down inflation below 3%.
In addition, the U.S. Treasury plans to borrow at an elevated pace for the next five months to finance the growing budget deficit.
The yield on 10-year U.S. bonds traded above 4% for the second day in a row and the yields are likely to cross 9-month high.
REITS and stocks in real estate sector and home builders fell more than 2% for the second day in a row, after yields rose.
U.S. Indexes & Yields
The S&P 500 index traded down 0.5% to 4,491.40 and the Nasdaq Composite declined 0.3% to 13,933.52.
The yield on 2-year Treasury notes increased to 4.91%, 10-year Treasury notes inched higher to 4.14% and 30-year Treasury bonds edged down to 4.29%.
Crude oil increased $0.40 to $79.88 a barrel and natural gas prices increased 4 cents to $2.51 a thermal unit.
U.S. Stock Movers
DoorDash Inc increased 0.6% to $86.50 after the delivery company reported better-than-expected revenue in its latest quarter.
Qualcomm Inc plunged 9.6% to $116.80 after the semiconductor chipmaker reported weaker-than-expected revenue in the fiscal third quarter and forecasted lighter-than-expected revenue in the current quarter.
Demand for smartphones in China has not rebounded to the projected levels and the China region accounts for about 61% of Qualcomm sales.
Qualcomm said overall smartphone shipments are expected to decline in high single-digit percentage rate in 2023.
PayPal Holdings declined 8.8% to $66.70 despite the company meeting earnings expectations set by some investors.
The payment processing company posted adjusted earnings in the second quarter of $1.16 a share and revenue of $7.29 billion.
Etsy Inc declined 9.6% to $86.88 after the company reported second quarter earnings that met analysts' estimates but forecasted revenue in the third quarter below expectations.
European Markets Struggled Second Day On Economic Slowdown Worries
Market indexes retained negative bias for the third day in a row after investors reviewed economic data in the region and the Bank of England's rate decision.
Market averages in Frankfurt, Paris and London declined and tech sector stocks led decliners after investors focused on the latest earnings results.
Infineon, Lufthansa, Societe Generale, Rolls Royce, AXA, Adecco and BMW were in focus after the release of earnings.
Bank of England Lifted Rates by 25 Basis Points to 5.25%
The Bank of England lifted its key lending rate for the fourteenth time in a row by 26 basis points to 5.25%.
Interest rates in the U.K. are at a level last seen since 2008 and the central bank is expected to continue its rate hike campaign as inflation remains significantly above the target rate of 2%.
The Bank of England revised its inflation forecast to 5% by the end of 2023 and estimated inflation is likely to reach its 2% target by the second quarter of 2025.
German Trade Balance Expanded In June
German trade surplus expanded to €18.7 billion in June from an upwardly revised €14.6 billion in May, the Federal Statistics Office or DeStatis reported Wednesday.
Seasonally adjusted imports fell 3.4% from the previous month to €112.6 billion while exports edged 0.1% higher to €131.3 billion.
Exports to EU countries advanced 1.3%, and to the Euro Area increased 1.8% and imports from EU countries fell 3.1% and from the Euro Area declined 4.1%.
From a year ago, exports declined 1.9% and imports plunged 11.6%.
Wholesale Prices Dropped for 2nd Month
Producer prices in the Euro Area declined 3.4% in June following an upwardly revised fall of 1.6% in May, Eurostat reported Wednesday.
The ongoing decline in energy prices dragged down the measure of wholesale inflation for the second month in a row and the index fell to the lowest level since June 2020.
On a monthly basis, the index declined 0.4% in June and fell for the sixth consecutive month in a row.
In the month, energy prices fell 16.5% compared to a decline of 13.5% in May, intermediate goods prices fell 2.7% compared to 1.5%, but capital goods prices rose at a slower pace of5.2% from 5.6%, durable consumer goods prices slowed to 5.9% from 6.7% and non-durable consumer goods prices eased to 8.9% from 9.6% a year ago.
Europe Indexes & Yields
The DAX index decreased 0.8% to 15,893.38, the CAC-40 index fell 0.7% to 7,260.53 and the FTSE 100 index dropped 0.6% to 7,529.16.
The yield on 10-year German bonds increased to 2.53%, 8rench bonds traded higher to 3.10%, the UK gilts edged up to 4.42% and Italian bonds increased to 4.25%.
The euro edged lower to $1.091, the British pound to $1.266 and the U.S. dollar fetched 87.63 Swiss cents.
Brent crude increased $1.93 to $85.13 a barrel and the Dutch TTF natural gas increased €1.43 to €30.47 per MWh.
Europe Stock Movers
BMW declined 1.7% to €103.44 after the German luxury vehicle maker warned of simmering supply chain issues and higher inflation for the remainder of the year.
Infineon Technologies AG dropped 7.8% to €35.09 after the company reported a decline of 10% in its adjusted quarter earnings.
Adidas AG increased 2.2% after the German sportswear maker revised higher its 2023 sales outlook.
AXA SA declined 0.6% to €27.23 after the French insurance company reported first-half net income declined to €3.83 billion compared to €3.85 billion a year ago.
Rolls-Royce Holdings Plc increased 3% to 189.55 pence after the aviation and defense company reported higher first-half net profit after margins improved in its civil aviation business.
Societe Generale SA increased 2.9% to €24.69 after the company returned to profitability in the second quarter and resumed its stock repurchase plan of €440 million.
Volatile mining companies traded lower following the weak sentiment in the commodities markets.
Glencore, Anglo American and Antofagasta declined between 1% and 3%.