Indexes in Germany, France Extended First Half Gains After Inflation Eased and Jobless Rate Held at Record Low

Bridgette Randall
30 Jun, 2023
Frankfurt

European markets staged a rally after encouraging news on inflation and the labor market whetted appetite for stocks on the final day of the first half. 

Market indexes in Frankfurt, Paris and London jumped as much as 1% after rate hike worries eased following the decline in inflation and record low unemployment. 

At the end of first half, the DAX index is up 14.5%, the CAC-40 index has advanced 12.2% and the FTSE 100 index is down 0.4%. 

 

Eurozone Inflation Eased to 5.5% 

Consumer price inflation in the eurozone eased to 5.5% in June from 6.1% in May, the statistical agency of the European Union reported Friday. 

The consumer inflation rate dropped for the third month in a row and fell to the level last seen in January 2022. 

On a monthly basis, consumer price inflation and core inflation was 0.3% in June. 

Investors cheered the steady decline in inflation but the level remained above the European Central Bank's target rate of 2%. 

Moreover, core inflation, which excluded volatile food and energy, prices increased to 5.4% from 5.3% and stayed near the recent peak of 5.7%. 

Energy prices declined at a faster pace of 5.6% compared to 1.8% in the previous month but food, beverages and tobacco inflation weakened to 11.7% from 12.5% and non-energy industrial goods inflation eased to 5.5% from 5.8%. 

On the other hand, service inflation accelerated to 5.4% from 5.0% in the previous month.  

In the currency union, inflation in Germany accelerated to 6.8% from 6.3% but slowed in Austria, the Netherlands, Portugal, Italy and France. 

Inflation in Spain, Luxembourg and Belgium dropped below the ECB's target level of 2%. 

 

Eurozone Jobless Stays at Record Low 6.5% 

The seasonally adjusted unemployment rate held at 6.5% in May and matched previous month's rate but fell from 6.7% in the month a year ago, Eurostat reported Friday. 

The record low jobless rate highlighted tight labor market conditions and the number of unemployed declined by 57,000 from the previous month to 11.014 million, the lowest level since record keeping began in 1995. 

Compared to a year ago, unemployment decreased by 257,000 in the European Union and 227,000 in the Euro Area. 

Jobless rate among young workers, those below the age of 25, held at 13.9% or 2,226 million compared to previous month.  

Youth unemployment increased 46,000 from a year ago and advanced 11,000 from April. 

Youth unemployment in the currency union was the highest in Spain with 28.4%, followed by Greece with 24% and Sweden with 20.5%. 

In the four largest economies of the Euro Area, Germany recorded the lowest jobless rate of 2.9%, while Spain led with 12.7% followed by 7.6% in Italy and 7% in France. 

 

Europe Indexes & Yields 

The DAX index increased 1.0% to 16,109.52, the CAC-40 index jumped 1.0% to 7,386.74 and the FTSE 100 index increased 0.7% to 7,524.62. 

The yield on 10-year German Bunds inched higher to 2.44%, French bonds traded lower to 2.98%, the UK gilts edged up to 4.44% and Italian bonds increased to 4.12%.

The euro edged higher to $1.08, the British pound to $1.265 and the U.S. dollar fetched 90.14 Swiss cents

Brent crude increased $0.31 to $74.82 a barrel and the Dutch TTF natural gas increased €0.12 to €35.20 per MWh.

 

Europe Stock Movers

Resource and mining stocks were among the leading gainers after crude oil and copper prices edged higher. 

Antofagasta, Glencore and Anglo American advanced between 1% and 2%. 

BP plc, Shell Plc, Repsol, Eni SpA and TotalEnergies SE increased between 1% and 3%.   

Barratt Developments PLC increased 1% to 416.70 pence after the UK-based homebuilder agreed to sell 604 homes to a unit of Lloyds Banking Group, Citra Living Properties, for £164.8 million. 

LEG Immobilien SE jumped 4.7% to €52.82 after the company revised higher its 2023 outlook. 

Adidas AG increased 2.2% to €177.26 and Puma SE advanced 3.5% to €55.08. 

Sodexo SA declined 2.6% to €99.16 despite the French in-flight catering company lifting higher its benefits and reward services outlook for the second time this year. 

Revenue in the fiscal third quarter increased 9.1% to €6 billion, driven by 12.1% revenue growth in North America to €2.6 billion, 4.4% increase in Europe to €2.0 billion and 16.3% in the rest of the world to €1.0 billion.