European Markets Rebounded After Eurozone Inflation Eased and New Record Low In Jobless Rate

Bridgette Randall
01 Jun, 2023
Frankfurt

European markets rebounded after the jobless rate fell to a new low and inflation eased to the level last seen thirteen months ago. 

Inflation pressures eased after energy prices declined and food inflationary pressures weakened, supporting the case for the central bank to consider pausing aggressive rate hikes. 

Stocks responded positively to tight labor market conditions after the jobless rate dropped to a new record low since record keeping began in 1995. 

Market optimism was bolstered after the debt ceiling agreement was passed by an overwhelming majority in the U.S. House of Representatives, raising hopes of smoother passage in the Senate before the critical deadline on June 5. 

Crude oil hovered around the recent lows after a private survey in China showed the manufacturing sector unexpectedly expanded in May. 

The Caixin China Manufacturing General Manufacturing PMI increased to 50.9 in May from 49.5 in April. The survey focuses more on companies in the private sector.  

The reading above 50 indicates expansion and below shows a contraction.  

A day ago, an official manufacturing industry survey, which is heavily focused on large government controlled enterprises, showed a contraction. 

 

Eurozone Inflation Eased In May 

The consumer price inflation in the Euro Area slowed in May after energy prices fell and food inflation slowed, the Eurostat reported Thursday. 

Core inflation, which excludes food, energy, alcohol and tobacco, eased to 5.3% from 5.6% in April.

Consumer price index eased to 6.1% in May from 7.0% in April and fell to the slowest pace since February 2022. 

Energy prices declined 1.7% in the month after rising 2.4% in April and food, alcohol and tobacco inflation eased to 12.5% from 13.5%, non-energy industrial goods inflation weakened to 5.8% from 6.2% and service inflation ebbed to 5.0% from 5.2%. 

 

New Record Low Jobless Rate In Eurozone 

The euro area seasonally-adjusted unemployment rate declined to 6.5% in April from 6.6% in March and from 6.7% from a year ago, the statistical office of the European Union or Eurostat reported Thursday. 

The jobless rate in the currency union dropped to the lowest level since record keeping began in 1995. 

In the currency union, the number of unemployed fell 33,000 from the previous month to 11.088 million and declined 203.000 from a year ago. 

Youth unemployment, those younger than 25, declined to 13.9% in April from 14.0% in March and about 2.2 million were unemployed. 

Of the largest economies in the Euro Area, Germany recorded a jobless rate of 2.9%, in France 7.0%, in  Italy 7.8% and Spain 12.7%. 

 

Europe Indexes & Yields 

The DAX index increased 1.1% to 15,838.66, the CAC-40 index rose 0.7% to 7,150.96, and the FTSE 100 index advanced 0.5% to 7,481.20.

The yield on 10-year German Bunds inched higher to 2.29%, French bonds traded higher to 2.87%, the UK gilts held at 4.19% and Italian bonds decreased to 4.08%.

The euro edged lower to $1.07, the British pound to $1.245 and the Swiss franc to 90.82 cents.

Brent crude decreased $0.38 to $72.20 a barrel and the Dutch TTF natural gas increased €2.80 to €24.05 per MWh.

 

Europe Stock Movers 

Lonza Group AG increased 1.2% to CHF 576.20 after the Swiss manufacturing company agreed to acquire Holland-based Synaffix, the developer of antibody drug conjugates.  

FLSmidth & Co advanced 2.7% to DKK 296.80 after the Danish company agreed to acquire the U.S. based Morse Rubber, the maker of rubber products for marine, industrial and mining applications. 

BAE Systems Plc increased 1.1% to  939.20 pence after the company said it has hired Morgan Stanley to launch the repurchase of £500 million of  its own stock.  

Safran SA advanced 1.5% to €137.46 after the company said it entered into exclusive negotiation with Air Liquide SA to purchase its aeronautical oxygen and nitrogen business, excluding cryogenic business related to marine applications. 

Dr Martens PLC dropped 8.5% to 143.0 pence after the UK-based boot maker said its operating margin is likely to fall this year. 

Revenue in the fiscal year 2023 ending in March increased 10% to £1.0 billion but profit after-tax declined 28% to £128.9 million from £181.2 million a year ago. 

The company recommended a final dividend of 4.28 pence, matching the previous year and increasing the total dividend to 5.84 pence, an increase of 6% from a year ago. 

The company estimated operating earning margin to fall between 1% and 2% because of the need to invest in the supply chain to support long term sales growth.