European Markets Rest Near Recent Highs, BoE Expected to Lift Rates

Bridgette Randall
10 May, 2023
Frankfurt

European markets drifted lower and investors reacted to corporate results. 

Benchmark indexes in Frankfurt, Paris and London traded lower but hovered near record highs as investors worried about future rate paths. 

Despite multiple interest rate hikes and four-decade high inflation, corporate profits have met or exceeded investor expectations. 

Travel and leisure companies are reporting stronger-than-expected sales and energy companies are reporting weaker revenues and earnings after record results in the previous year. 

The Bank of England is set to increase its key lending rate by 25 basis points to 4.5% as inflation stayed near 10% in March. 

Investors across Europe are worried that rapid rise in interest rates are feeding into the broader economy and negatively impacting the commercial real estate sector. 

Banks in the region are also in focus on the worries that higher rates have caused significant losses, though unrealized, in government securities held by banks of all sizes.  

Investors are also awaiting the latest report on the U.S. consumer price inflation later in the day with expectations running around 5% and core inflation easing slightly to 5.5%. 

 

Europe Indexes & Yields 

The DAX index decreased 0.3% or 40.68 points to 15,914.85, the CAC-40 index fell 0.2% or 15.72 points to 7,380.71 and the FTSE 100 index declined 0.2% or 15.52 to 7,748.67. 

For the year so far to the close of Tuesday, the DAX index increased 13.1%, the CAC-40 index 11.9% and the FTSE 100 index about 2.6%. 

The yield on 10-year German Bunds inched up to 2.31%, French bonds traded slightly higher to 2.92%, the UK gilts inched higher to 3.84% and Italian bonds advanced to 4.24%.

The euro edged higher to $1.095, the British pound to $1.262 and the Swiss franc to 89.09 cents.

Brent crude fell 77 cents to $76.67 a barrel and the Dutch TTF natural gas decreased €0.40 to €36.55 per MWh.

 

Europe Stock Movers 

Alstom SA decreased 2.5% to €22.84 after the transportation company delayed its mid-year targets by a year and blamed it on macroeconomic conditions. 

Revenue in the full-year 2023 ending in March increased 7% to €16.5 billion and adjusted net profit increased to €292 million from a loss of €173 million a year ago. 

Credit Agricole SA increased 5.5% to €11.76 after the French lender reported record first quarter revenue. 

Reported group revenue increased 0.5% to €8.9 billion and net income rose 23.6% to €1.7 billion. 

Loans issued in the quarter by regional banks declined 6.2% driven by a 14.3% fall in home loans as higher rates and elevated home prices kept buyers away from the market. 

Credit Agricole SA, standalone revenue in the fiscal year 2023 increased to €6.1 billion from €5.6 billion and net income rose to €1.2 billion from €0.57 billion and earnings per share increased to 36 cents from 15 cents a year ago.   

TUI AG declined 3.6% to 541.80 pence after the tour operator reported a narrower underlying operating loss. 

Revenue in the second quarter increased to €3.1 billion from €2.1 billion and the group's loss expanded to €326.2 million from €321.4 million and loss per share increased to €1.26 from €1.21 a year ago. 

The travel company said summer and winter season bookings increased to  12.9 million and forecasted air travel capacity for summer travel to match 2019 level. 

Melrose Industries PLC increased 3.5% to 439.30 pence after the company said revenues are "materially ahead of expectations." 

The company said in its trading update revenue in the first four months to April increased 19% and adjusted operating margin increased about 10% from a year ago. 

The company forecasted full-year 2023 revenue between £3.35 billion and £3.45 billion and adjusted operating profit between £340 million and £360 million. 

Compass Group Plc increased 1.7% to 2,100  pence after the UK-based catering company reported strong first-half results and lifted its annual outlook.