European Markets Rebounded, Euro Area GDP Barely Expanded

Bridgette Randall
28 Apr, 2023
Frankfurt

Major averages in Europe turned lower after investors reviewed the latest corporate results and economic data. 

Caution prevailed in the final trading day of the week, after economic growth in the eurozone was a meager 0.1% and the German economy registered flat growth after higher interest rates and elevated inflation hit the aggregate demand. 

On the earning front, companies reported mixed quarterly results. Mercedes Benz lifted its outlook for its vans division but Swedish appliance maker Electrolux reported weak demand. 

Danske Bank posted a sharp increase in first quarter profit and NatWest reported higher profit but the the U.K.-based Amundi reported a decline in assets under management.  

 

Euro Area Registered Weak Q1 Economic Growth 

Economic growth in the Euro Area in the first quarter was 0.1%, according to the preliminary data released by the Eurostat, the statistical office of the European Union. 

GDP expanded 0.1% from the previous quarter in the currency union and rose 0.2% in the wider European Union. 

From a year ago, seasonally adjusted GDP increased 1.3% in both the  euro area and the EU in the first quarter of 2023, after a rise of 1.8% in the euro area and 1.7% in the EU in the fourth quarter of 2022. 

Among the member states, economic growth from the previous quarter in Germany was flat, in France 0.2% and Spain and Italy 0.5% 

Portugal led the region with a rise of 1.6% and the Irish economy registered the largest decline of 2.7%.

 

Spain and French Inflation Rates Accelerated 

Inflation rate in France unexpectedly accelerated in April to 5.9% from 5.7% in March, according to the data released by the statistical office INSEE on Friday. 

Inflation accelerated following the faster rise in energy prices of 7% in April compared to 4.9% in March and services at 3.2% from 2.9%. 

On a monthly basis, the consumer price inflation rose 0.6% following a 0.9% gain in March. 

The harmonized inflation index increased 0.7% on a monthly basis and rose 6.9% from a year ago. 

Consumer price index in Spain accelerated to 4.1% in April from an 18-month low of 3.3% in March, the National Statistics Institute INE reported Friday. 

The electricity prices declined at a slower pace and fuel prices rebounded in April, offset by a smaller rise in food and alcohol beverages.   

Core rate of inflation, which excludes energy and food prices, weakened to 6.6% from 7.5% in March. 

On a monthly basis, consumer prices rose 0.4% in April, matching the rate in the previous month. 

 

Europe Indexes & Yields 

The DAX index increased 0.8% to 15,922.38, the CAC-40 index increased 0.1% to 7,491.50 and the FTSE 100 index added 0.5% to 7,807.57. 

For the week, the DAX index increased 0.4%, the CAC-40 index dropped 1.8% and the FTSE 100 index declined 0.6%. 

The yield on 10-year German Bunds eased to 2.38%, French bonds to 2.96%, the UK gilts to 3.73% and Italian bonds to 4.28%.

The euro hovered near a one-year high against the dollar as the U.S. economy faced banking turmoil. 

The euro edged higher to $1.093, the British pound to $1.246 and the Swiss franc to 89.53 cents.

Brent crude rose 19 cents to $78.41 a barrel and the Dutch TTF natural gas increased 83 cents to €39.89 per MWh.

 

Europe Stock Movers 

Electrolux AB increased 7.8% to SEK 144,30 after the Swedish appliance maker posted a smaller-than-expected loss. 

Revenue in the first quarter rose 9% to  SEK 32.73 billion from SEK 30.12 billion, and organic sales rose 2.2%. 

The company maintained higher prices but sales volume declined in the quarter. 

Loss in the first quarter was SEK 588 million compared to a profit of 950 million and diluted earnings per share was (SEK 2.18) compared to SEK 3.14 a year ago.  

Eni SpA declined 0.7% to €13.40 after net income in the first quarter declined 11% from a year ago on lower oil and natural gas prices. 

Covestro AG soared 6.4% to €39.02 after the German chemical company said it plans to resume its previously announced stock repurchase program.  

NatWest Group Plc declined 4.5% to 260.0 pence after the UK-based bank reported weaker-than-expected outlook. 

Pearson Plc rose 3.3% to 882.80 pence after the U.K.-based publishing company reported quarterly results and announced its plan to commence a stock repurchase program in the second-half of 2023.  

Mercedes Benz Group AG declined 1% to €69.37 after the vehicle maker reported a 12% rise in its first quarter profit. 

Moreover, the luxury vehicle maker warned that recent turmoil in the banking sector in the U.S. and Europe may negatively impact future sales.