European Markets Trade Down Fighting Slower Growth and Faster Rate Worries

Bridgette Randall
13 Jul, 2022
Frankfurt

European markets dropped  after the U.S. inflation accelerated in June.  

The DAX index declined 1.3% to 12,742.07, the CAC-40 index fell 1.1% to 5,977.07, and the FTSE 100 index decreased 0.8% to 7,152.80. 

The indexes were under pressure from the start but dropped sharply after the release of the U.S. inflation report. 

The 4-decade high inflation in the U.S. is expected to support Fed's plan of lifting interest rates at a faster pace of 75 basis points at the next Fed's meeting on July 26-27. 

Consumer prices in June accelerated at a 9.1% rate after rising 8.6% in May, the Bureau of Labor Statistics reported on Wednesday. 

Core prices, excluding food and energy, rose 5.9% in June after rising at 6.0% in May. 

Much of the inflation was driven by a sharp rise in gasoline prices, advancing 11.2% on a monthly basis and nearly 60% from a year ago. 

Benchmark indexes in the region recovered in the next two hours of trading from the lows after the release of the U.S. inflation report. 

 

Eurozone Production Rises, UK GDP Expands 

Eurozone production increased 0.8% and 0.6% in the European Union in May on a monthly basis, the eurostat reported on Wednesday. 

On an annual basis, industrial production increased 1.6% in the euro area and 2.7% in the EU in May. 

The U.K. GDP increased 0.5% in May from the revised decline of 0.2% in April, the Office for National Statistics said on Wednesday. 

The expansion was broad based driven by increases in services, production, and construction. 

The monthly GDP is now estimated to be 1.7% above its pre-coronavirus pandemic levels in February 2020.

On an annual basis, the GDP rose 3.5% in May after rising at 3.7% in April. 

 

Rate Worries Drag Euro to Dollar Parity 

The euro inched lower to $1.003 and the negative sentiment persisted in the currency trading on the expectations of slower economic growth and rising interest rates in the region. 

The euro traded at $1.14 at the start of 2022 and has steadily fallen, driven by the deepening energy crisis, Ukraine war, and widening rate gaps between Germany and France and peripheral economies of Italy, Spain, and Greece. 

Scandinavia Airlines surged 9.50% to kr 0.67 after the pilot union resumed talks with the embattled airline's management today. 

Credit Suisse Group AG declined 3.8% to 5.29 swiss francs and the investment banker said it postponed the initial public offering of its real-estate fund 1a Immo PK because of weak market conditions. 

J D Wetherspoon plc dropped 8.3% to 577.50 pence after the pub chain operator said comparable sales declined 0.4% in the June quarter compared to 4% decline in the March quarter from similar periods in 2019. 

"Many people predicted a boom in pub sales when lockdowns and restrictions ended, due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated.

Although sales now match 2019, labour costs are far higher. The company is, with minor exceptions, fully staffed," the pub operator said in  a press release. 

Concurrent Technologies jumped 7.2% to 79.89 pence after the company won an order to supply high-end computer boards. 

The company "entered into a supply agreement and has received a $2.2 million order for initial product shipments from a global medical technology company based in the USA.  

Initial shipments have commenced for qualification purposes with volume shipments scheduled to start at the end of 2022," the advanced embedded boards maker said in a statement to investors today. 

Tullow Oil Plc declined 2.8% to 42.62 pence despite the company reaffirming its full-year outlook. 

Glencore Plc declined 1.03% to 417.70 pence after the company said it completed the sale of  a royalty package by BaseCore Metals LP to Sandstorm Gold Ltd. for $525 million.

BaseCore is equally owned by Glencore and Ontario Teachers