European Markets Fall Ahead of Rate Decisions Next Week

Bridgette Randall
09 Jun, 2023
Frankfurt

European markets traded in a tight range and investors remained on the sidelines ahead of rate decisions next week. 

Benchmark indexes in London, Paris and Frankfurt traded with a downward bias and investors debated the rate path and reviewed the region's economy. 

The Euro Area entered into a technical recession after GDP declined for two quarters in a row. 

Inflation has been on the downward slide but prices are still rising at a faster pace than the 2% target set by the central bank. 

The European Central Bank is expected to lift its benchmark rate by 25 basis points despite the recent weakening of price increases by sharp fall in energy prices. 

Goods inflation has cooled but service prices are rising at a faster pace and core inflation has stayed between 4% and 5%. 

The ongoing challenging economic conditions were visible in the latest industrial production data. 

Italy's industrial production declined 1.8% from the previous month in April and dropped 7.2% from a year ago, the statistical agency ISTAT reported Friday. 

For the week, the DAX index declined 0.9%, the CAC-40 index dropped 1% and the FTSE 100 index eased 0.6%. 

For the year so far, the DAX index has gained 13%, the CAC-40 advanced 9.2% and the FTSE 100 index edged up 0.1%. 

Turkish lira declined to 23.50 against the U.S. dollar and dropped to a new low and extended loss to 18% since May 28 when President Erdogan was reelected. 

 

Europe Indexes & Yields 

The DAX index decreased 0.3% to 15,951.57,  the CAC-40 index declined 0.2% to 7,208.63, and the FTSE 100 index inched lower 0.4% to 7,570.66. 

The yield on 10-year German Bunds inched lower to 2.41%, French bonds traded lower to 2.96%, the UK gilts edged down to 4.21% and Italian bonds decreased to 4.19%.

The euro edged lower to $1.072, the British pound to $1.252 and the.  Swiss franc to 90.17 cents.

Crude oil is set to decline for the second week in a row as China demand growth worries outweighed the additional production cuts announced by Saudi Arabia last weekend. 

China's producer prices fell at the sharpest pace in May in seven years and dropped for the eighth month in a row and consumer prices rose modestly in the month. 

Brent crude decreased $0.14 to $75.81 a barrel and the Dutch TTF natural gas increased €1.21 to €28.15 per MWh.

 

Europe Stock Movers

Croda International declined 10.2% to 5,254.0 pence after the company reported weaker-than-expected results. 

The chemical company estimated pre-tax profit of  £143 million for the period between January and May 2023 and pre-tax profit for the full-year 2023 between £370 million and £400  million. 

The weak outlook dragged chemical stocks. 

Energy and resource stocks traded lower after crude declined for the second week in a row. 

Shell Plc, BP Plc, Repsol, Eni and TotalEnergies declined between 0.3% and 0.6%. Glencore, Antofagasta, and Anglo American declined between o.2% and 0.5%. 

Banks were also under pressure ahead of the rate decision next week. 

Barclays, BNP Paribas, Deutsche Bank and UniCredit SpA declined between 0.6% and 1.2%.