European Markets Edged Higher, New Low In Swedish Krona, Spanish Inflation Below 2%

Bridgette Randall
29 Jun, 2023
Frankfurt

European markets edged higher after hawkish comments from central banks in the previous session dented sentiment. 

Investors reviewed a slew of economic data from Sweden, Spain, UK and Eurozone. 

The eurozone economic sentiment indicator declined to 95.3 in June from 96.4 in May, the European Commission reported. 

The sentiment indicator declined to the lowest level since November and fell for the second month in a row on persistent high inflation and rising interest rates. 

The sentiment index deteriorated the most in Germany, the Netherlands, Italy and Spain but recovered in France. 

Market indexes in Frankfurt, Paris and London gained in a tentative rebound after heads of central banks of European Union, US and UK reiterated their commitment to reducing inflation to 2%. 

Hawkish talks from central banks put investors on alert that the aggressive rate hike campaign is going to continue and interest rates will rise in the US, UK and Europe at next policy meetings over two months. 

Swedish krona faced fresh selloff after the central bank lifted rates at a slower pace. 

The krona dropped to 10.8 against the dollar and plunged to a record low 11.8 against the euro after weaker-than-expected rate increase and risk aversion kept the currency under pressure. 

Sentiment for the currency weakened on the fears that the central bank has little flexibility in lifting rates on the worries of a deepening rout in the property sector after higher rates plunged property prices by 20% from the peak in March 2022. 

 

Sweden Hiked Rates to 3.75% 

The central bank of Sweden lifted its policy rate by 25 basis points to 3.75%, seventh rate increase in a row. 

Sveriges Riksbank raised rates to the level last seen in 2008 and left its inflation outlook to 8.9% in the current year but revised higher to 4.3% from the previous estimate of 4% in 2024. 

The central bank also lowered its estimate of economic contraction to 0.5% from the previous estimate of 0.7% and forecasted flat economic growth in 2024. 

The central bank estimated policy rate at 3.75% in the third quarter from the prior estimate of 3.6% and increase to 4.05% from 3.6% in the second quarter of 2024 and keep rates at that level till the second quarter of 2025 before declining to 3.65% from the previous estimate of 3.35% in the second quarter of 2026. 

Investors reviewed the latest inflation data from Spain and Germany. 

 

Spain's Overall Inflation Slowest In Two Years 

Spain's consumer price inflation declined to 1.9% in June, the National Statistical Institute reported Thursday. 

The preliminary estimate of inflation declined below the 2% target set by the European Central Bank for the first time before March 2021. 

On a monthly basis, consumer prices increased 0.6% in June after staying flat in May. 

Core inflation, which excludes fresh food and energy, eased slightly to 5.9% in June from 6.1% in May but persistent inflation in services and non-energy products kept prices rising at elevated pace.  

 

Europe Indexes & Yields 

The DAX index increased 0.1% to 15,968.48, the CAC-40 index jumped 0.8% to 7,342.16 and the FTSE 100 index decreased 0.2% to 7,482.67.

The yield on 10-year German Bunds inched higher to 2.34%, French bonds traded lower to 2.87%, the UK gilts edged up to 4.33% and Italian bonds increased to 4.02%.

The euro edged higher to $1.09, the British pound to $1.263 and the U.S. dollar fetched 89.61 Swiss cents

Brent crude increased $0.11 to $74.11 a barrel and the Dutch TTF natural gas increased €1.09 to €33.04 per MWh.

 

Europe Stock Movers

H & M Hennes & Mauritz AB jumped 16% to SEK 182.60 after the Swedish apparel retailer reported stronger-than-expected results in the quarter ending in May. 

Renault SA jumped 6.3% to €38.73 after the French automaker lifted its annual operating margin outlook following the success of recently launched new vehicles. 

IWG Plc declined 4.9% to 133.20 pence after the office space provider offered a cautious outlook for the remainder of the year. 

Burberry Group Plc decreased 1.9% to 2,097.0 pence after the stock of the luxury apparel and accessories retailer traded ex-dividend. 

Serco Group Plc increased 11.3% to 158 pence after the security outsourcing services provider lifted its full-year outlook. 

3i Group Plc increased 1.5% to 1,910 pence after Action, the company invested in,  reported an increase in sales in the year so-far.