European Stocks Inch Up, Eurozone Growth Revised Higher

Bridgette Randall
07 Sep, 2022
Frankfurt

European markets advanced and energy prices in the region fell for the third day in a row. 

Investors are bracing another round of rate hike as central banks in the U.S., Europe and Asia target inflation in a coordinated fashion. 

The European Central Bank is set to lift its key lending rate by as much as 75 basis points and the U.S. Federal Reserve is expected to match the hike at its next two-day policy meeting ending on Sep 21.

The National Bank of Poland lifted its key lending rate by 25 basis points to 6.75%, marching the market expectations. 

Two days ago, the Reserve Bank of Australia hiked its key lending rate by 50 basis points to 2.35% as expected. 

The latest hike follows three increases of similar size in the previous three months and 25 basis points increase in May, lifting the rates to the levels last seen in January 2015. 

The Bank of Canada lifted its overnight lending rate by 75 basis points to 3.25% meeting the market expectations. 

The latest rate hike is the fifth consecutive increase in a row, lifting the lending rates to a high not seen since 2008. 

The DAX index increased 0.4% to 12,915.97, the CAC-40 index rose 0.02% to 6,105.92, and the FTSE 100 index fell 0.9% to 7,237.83. 

Brent crude oil prices fell 4.9% to $88.26 a barrel and TTF gas prices plunged 11.4% to 213.81 euros a megawatt a hour.  

The U.S. dollar continued to rise and the euro dropped to $0.994 and the British pound eased to $1.147, the lowest in 37 years as investors anticipate inflation to accelerate and economic conditions to weaken. 

Rising current account deficit and dropping investor confidence has hammered the pound 15% against the U.S. dollar this year.   

The British pound is set to test its record low of $1.02 reached in February 1985. 

 

Eurozone GDP Growth Revised Higher 

The euro area economic growth was faster than previously estimated, according to the latest revision from Eurostat released Wednesday. 

Preliminary estimate was released on Aug 17. 

GDP growth in the second quarter was revised higher to 0.8% from 0.6% on a sequential basis. The economy expanded at a 4.1% from the previous estimate of 3.9% from a year ago. 

The  eurozone economy in the first quarter rose 0.7% from the previous quarter and jumped 5.4% from a year ago. 

German industrial production fell 0.3% in July after rising 0.8% in June, Destatis reported Wednesday. 

Industrial production declined 1.1% after easing 0.1% in June on an annual basis, 

In stock trading, resource stocks led the decliners after Brent crude oil prices fell 4.9% and natural gas prices dropped 11%. 

Glencore, Anglo American, Antofagasta and BHP Group dropped between 2% and 3%.