European Markets Turn Cautious, Technical Recession In Eurozone

Bridgette Randall
08 Jun, 2023
Frankfurt

European markets traded in a narrow range and investors remained cautious ahead of rate decisions next week. 

Bond yield in the region rose ahead of the European Central Bank's rate decision next week. The yields were also on the rise after the Bank of Canada and the Reserve Bank of Australia lifted rates by 25 basis points. 

The U.S. Federal Reserve is also likely to lift its key lending rate by 25 basis points. 

Tech stocks led decliners in the region and energy stocks led gainers in volatile trading in Paris, London and Frankfurt. 

Market sentiment was cautious after the eurozone economy unexpectedly shrank in the first quarter of 2023 following a downwardly revised final quarter of 2022, dragging the region into technical recession. 

 

Technical Recession in Euro Area 

The Euro Area economy unexpectedly shrank 0.1% in the first quarter, the statistical office of the European Union Eurostat reported Thursday. 

The GDP growth estimate for the final quarter of 2022 was revised to a decline of 0.1% from flat, indicating that the economy of the currency union entered a technical recession.  

On an annual basis, seasonally adjusted GDP increased 1.0% in the first quarter of 2023, slower than the 1.8% rise in the final quarter of 2022. 

Poland recorded the highest increase of 3.8% in GDP compared to the previous quarter, followed by  2.0% in Luxembourg and 1.6% in Portugal. 

Ireland's GDP shrank the most in the currency union with a fall of 4.6%, followed by 2.1% decline in Lithuania and 0.7% decrease in the Netherlands. 

GDP contracted 0.3% in Germany but expanded 0.5% in Spain, 0.2% in France and 0.6% in Italy. 

 

Europe Indexes & Yields 

The DAX index increased 0.2% to 15,998.35, the CAC-40 index increased 0.2% to 7,220.64, and the FTSE 100 index inched lower a fraction to 7,623.46. 

The yield on 10-year German Bunds inched higher to 2.46%, French bonds traded higher to 3.01%, the UK gilts edged up to 4.29% and Italian bonds increased to 4.26%.

The euro edged lower to $1.072, the British pound to $1.246 and the Swiss franc to 90.95 cents.

Brent crude increased $0.72 to $77.68 a barrel and the Dutch TTF natural gas increased €2.15 to €28.48 per MWh.

 

Europe Stock Movers

FirstGroup Plc soared 15.5% to 137.50 pence after the transportation company announced a stock buyback plan of £115 million. 

The company also swung to a pre-tax profit in fiscal 2023 after revenue picked up. 

RWS Holdings Plc increased 14.3% to or 259.80 pence after the company launched a stock repurchase plan of up to £50 million. 

In the first-half, revenue increased and profit declined but the company confirmed that the full-year outlook is in line with market expectations. 

Wizz Air Holdings Plc increased 0.2% to 2,784.0 pence after the deep discount airline said loss shrank in the fiscal 2023 on higher revenue. 

The airline forecasted profitability in the fiscal year 2024. 

Crest Nicholson Holdings Plc dropped 8.2% to 229.04 pence after the company reported weaker-than-expected revenues in the first-half but swung to a profit from a loss in the corresponding period a year ago. 

Saint Gobain SA increased 1.2% to €56.73 after the French building materials company estimated fiscal 2023 operating margin between 9% and 11%. 

Mitie Group Plc added 0.5% to 96.90 pence after the outsourcing company reported higher revenue but flat after-tax earnings.