European Markets Extended Gains, Eurozone Inflation Confirmed at 6.1%

Bridgette Randall
16 Jun, 2023
Frankfurt

European markets traded higher a day after the central bank lifted its benchmark rate. 

Market indexes in Frankfurt, London and Paris edged higher after a week of volatile trading as investors remained focused on the health of the economy and pace of future rate hikes.

Bond yields in the region traded near recent highs, and the U.S. dollar index weakened 1.2% on the hopes that the U.S. Federal Reserve will remain on hold at its next policy meeting in July. 

The eurozone inflation was confirmed flat from the previous month in May, Eurostat reported on Friday. 

The annual pace of inflation was 6.1%, slower than 7.0% in April and lower than 8.1% in the month a year ago. 

Overall inflation in May was driven by food, alcohol & tobacco inflation of 2.54%, followed by services inflation of 2.15%, non-energy industrial goods 1.51% and energy price declined of 0.09%.  

The Bank of Japan kept its ultra-loose monetary policy intact, bucking the hawkish trend in the Euro Area and the U.S. 

The BOJ left its key lending rate at minus 0..1% and kept its Yield Curve Control policy framework in place and 10-year Japanese government bond yield around zero. 

Expectations of additional stimulus in China rose after the People's Bank of China decreased its medium term lending facility rate by 10 basis points to 2.65%. 

Earlier in the week, fixed-assets investments, retail sales, property investments, and youth unemployment data suggested uneven and weak economic conditions in China.  

The Chinese government is expected to announce economic stimulus measures in the form of infrastructure spending in addition to lowering interest rates. 

 

Europe Indexes & Yields 

The DAX index increased 0.2% to 16,327.07,  the CAC-40 index advanced 0.7% to 7,346.60 and the FTSE 100 index increased 0.3% to 7,650.25. 

For the week, the DAX index added 1.5%, the CAC-40 advanced 1.9% and the FTSE 100 index increased 1.3%. 

The yield on 10-year German Bunds inched lower to 2.47%, French bonds traded lower to 2.98%, the UK gilts edged up to 4.34% and Italian bonds decreased to 4.08%.

The euro edged lower to $1.09, the British pound to $1.28 and the Swiss franc to 89.14 cents.

Brent crude decreased $0.40 to $75.27 a barrel and the Dutch TTF natural gas decreased €8.10 to €35.05 per MWh.

 

Europe Stock Movers

Solvay SA declined 2.9% to €104.20 and the company is in the process of splitting itself into two companies - Solvay and Syensqo.  

The company said it plans to repay 1.3 billion of hybrid bonds before the completion of the proposed split by the end of 2023.  

The ratings agency Moody's placed Solvay's debt rating on review for downgrade. 

Tesco Plc declined 1.3% to 261.0 pence and the discount grocery retailer said sales in the UK rose 9% in the latest quarter. 

Travis Perkins Plc declined 5.7% to 816.80 pence after the UK-based home improvement retailer lowered its annual profit outlook citing the difficult housing market.