Euro and European Bond Yields Drop to One-month Lows

Bridgette Randall
06 Feb, 2023
Frankfurt

European markets closed down after the U.S. dollar rebounded to a one-month high and the dollar index advanced. 

The rising U.S.-China tensions also hovered the trading session after the U.S. shot down the alleged spy balloon from China.  

The Euro Area retail sales declined in December after rising in November and barely increased in full-year 2022. 

German factory orders fell in December after excluding major orders and sales dropped in December after domestic and foreign orders eased. 

European markets accelerated the decline towards the close after traders reassessed the U.S. Fed's policy and the aggressive rate hike policy in the Euro Area. 

 

Euro Area Retail Sales in December Declined 

The seasonally adjusted retail sales volume in the Euro Area decreased 2.7% in December after rising 1.2% in November, according to an estimate from Eurostat, the statistical office of the European Union. 

The retail sales declined 2.8% on an annual basis in December from a year ago. 

For all of 2022, retail sales in the Euro Area barely increased 0.7% and rose 1.1% in the European Union.  

 

German Factory Orders and Sales In Focus 

Separately, the Destatis or the Federal Statistics Office of Germany said seasonally and price adjusted factory orders rose 3.2% on a monthly basis in December after falling 4.2% in November. 

December orders declined 0.6%, excluding large orders for electric utilities and aircraft and internal combustion engines. 

On a yearly basis, December orders declined 10.1% in December. 

German factory orders adjusted on a calendar basis in December are slightly ahead of pre-pandemic level by 1.2% from December 2019. 

However, sales of manufacturing companies fell 1.7% in December from November and rose 1.9% from a year ago. 

 

European Indexes Trend Lower 

European market indexes traded lower after stronger-than-expected U.S. jobs data for December dashed hopes that the U.S. Federal Reserve may pause its rate tightening cycle soon.  

The DAX index decreased 0.9% to 15,335.39, the CAC-40 index declined 1.5% and the FTSE 100 index dropped 0.9% to 7,825.82. 

The yield on 10-year German Bunds inched up to 2.28%, French bonds increased to 2.73%, UK Gilts to 3.26% and Italian bonds to 4.14%. 

Brent crude oil fell 4 cents to $79.89 and the Dutch TTF Spot price inched lower 71 euro cents to Є57.18 per MWh.  

The euro declined to $1.07, the British pound edged lower to $1.205 and the Swiss franc eased to 92.75 U.S. cents. 

 

Europe Movers

Aurubis AG declined 4.8% to €96.44 after the German copper smelter reported a sharp fall in earnings. 

Revenue in the fiscal first quarter ending in December 2022 declined 7% to Є4.1 billion.

Net income dropped to Є57 million from Є301 million and diluted earnings per share plunged to Є1.31 from Є6.89 a year ago. 

Higher energy and other input costs negatively impacted quarterly results. 

Banco BPM SpA increased 2.7% to €4.22 after the Italian bank's chief executive Guiseppe Castagna said that the bank is not interested in acquiring the rival Banca Monte dei Paschi di Siena.  

Banca Monte dei Paschi di Siena SpA declined 4.7% to  €2.37. 

Diageo Plc declined 0.2% to 3,572.15 pence after the British spirits maker launched a partial offer to increase its stake to 65% from the current stake of 50% in East African Breweries Plc.

 Rovio Entertainment Oyj rose 14.5% to €8.74 after the popular Angry Birds mobile game maker headquartered in Finland said it has launched a strategic review and preliminary non-binding talks with potential suitors. 

Novartis AG declined 0.5% to 79.15 Swiss francs and the Swiss pharmaceutical drug maker's unit Sandoz said it has won an approval from the U.S. drug regulator FDA has accepted its Biologics License Application for proposed biosimilar denosumab.   

“In addition to being an important medicine for cancer of the bone, denosumab is critical in the treatment of osteoporosis and potential prevention of osteoporosis-related fractures that so many women over 50 are at risk of,” said Keren Haruvi, President, Sandoz Inc. and Head of North America.