Growth Worries and Weak Resource Stocks Dragged Down European Markets

Bridgette Randall
31 May, 2023
Frankfurt

European markets turned lower after growth worries resurfaced and the U.S. debt ceiling revision faced critical voting from lawmakers later today. 

Major averages declined in London, Paris and Frankfurt on the worries that China's economic recovery may take longer than previously estimated. 

China's official manufacturing purchasing manager's index declined for the second month to 48.8 in May from 49.2 in April, the National Bureau of Statistics reported Wednesday.

The non-manufacturing purchasing manager's index, which tracks the confidence in the service and construction industries, slowed to 54.5 from 56.4 in April.    

Investors turned cautious as the U.S. debt ceiling agreement faced its first resistance from lawmakers in the lower house of Congress.

The full House of Representatives is expected to vote on the agreement as early as today and the Senate is likely to vote for the bill before the estimated default deadline June 5.

The House Ruling Committee in a narrow 7-to-6 vote approved the rules for debate and vote on the debt ceiling agreement later today. 

On the inflation front, France and Italy reported decline in consumer price inflation and Germany is expected to report its inflation reading later today. 

 

Italy's Consumer Inflation Slowed In April 

Italy's consumer price inflation slowed to 7.6% in May from 8.2% in April, the National Institute of Statistics ISTAT said Wednesday. 

Prices on a monthly basis rose at a slower pace of 0.3% in May from 0.4% in April. 

The preliminary estimate of inflation declined after prices of energy, transportation services and food products rose at a slower pace. 

Energy  price inflation slowed to 20.5% from 26.6% in April, processed food inflation eased to 13.4% from 14%, and transportation services inflation weakened to 5.5% from 6%.

However, elevated inflation was supported by the faster rise in costs of unprocessed food at 8.9% compared  to 8.4% in April, and habitational services rose at 3.4% from 3.2%.

Core consumer prices, which exclude unprocessed food and energy, slowed to 6.1% in May from 6.2% in April.

 

French Consumer Price Inflation Slowed In May 

Inflation forces ebbed in France in may after energy prices rose at a slower pace, the statistical office INSEE reported Wednesday. 

The consumer price inflation slowed to 5.1% in May from 5.9% in April, according to the preliminary estimate released by the government agency. 

On a monthly basis, inflation declined 0.1% in May from April, the first  monthly decline since December 2022. 

The inflation rate was the slowest since April 2022, but still stayed above the target rate of 2% set by the European Central Bank.  

Price increase slowed for energy at 2.0% from 6.8% in April, for food at 14.1% from 15.0%, for manufactured goods at 4.1% from 4.6%, and services at 3.0% from 3.2%.

However, tobacco products prices accelerated for the third month in a row. 

 

Europe Indexes & Yields 

The DAX index decreased 0.4% to 15,843.08 and the CAC-40 index fell 0.5% to 7,172.86, and the FTSE 100 index dropped 0.2% to 7,172.86. 

The yield on 10-year German Bunds inched lower to 2.25%, French bonds traded lower to 2.82%, the UK gilts held at 4.17% and Italian bonds decreased to 4.07%.

The euro edged lower to $1.067, the British pound to $1.232 and the Swiss franc to 91.06 cents.

Brent crude decreased $1.04 to $72.66 a barrel and the Dutch TTF natural gas increased €1.05 to €25.75 per MWh.

 

Europe Stock Movers 

Resource and energy stocks traded lower after China's official data showed manufacturing sector growth contracted at a faster pace in May. 

Glencore, Anglo American, Antofagasta, Shell Plc, TotalEnergies SE declined between 1% and 4%. 

Bloomsbury Publishing Plc increased 1.4% to 416.0 pence after the fiscal year 2023 revenue and earnings were ahead of market expectations. 

WH Smith Plc advanced 1.8% to 1,555.0 pence after the book retailer revised higher its full-year outlook. 

B&M European Value Retail SA  soared 8.20% to 510.58 pence after the discount retailer said adjusted core earnings in the fiscal year 2024 are expected to be higher.