European Markets Dropped 1% Dragged by Luxury and Resource Stocks After Weak China Economic Data

Bridgette Randall
17 Jul, 2023
Frankfurt

European markets fell on Monday following the weakness in metals and energy markets after China reported weaker than expected GDP growth data. 

Major averages declined between 0.5% and 1.4% in Paris, Frankfurt and London after China's GDP in the second quarter rose at a slower pace of 0.2% from the previous quarter. 

China also reported other economic data indicating weak economic recovery and investors are losing hopes of immediate stimulus measures. 

 

China GDP Growth Slowed In June Quarter 

GDP in the second quarter rose 6.3% from a year ago and advanced faster than 4.5% in the first quarter, the National Bureau of Statistics reported Monday. 

Retail sales rose 3.1% in June from a year ago, slower than 12.7% in May and industrial production advanced 4.4% compared to 3.5% in May. 

Private sector investment, a widely watched indicator for confidence in the private sector, declined 0.2% from a year ago in the six-month period to June, from 0.1% in the first five-month period ending in May.  

Fixed asset investment, the government's primary focus in ramping up infrastructure development, rose 3.8% from a year ago in the first six-month period to June, down from the growth of 4.0% in the five months to May.  

Jobless rate among the 16-24 age group jumped to a new high of 21.8% in June from 20.8% in May. 

Higher youth unemployment levels suggested weakening demand from the manufacturing sector.   

 

Europe Indexes & Yields

The DAX index decreased 0.5% to 16,020.29 16,103.98, the CAC-40 index advanced 1.2% to 7,283.26 and the FTSE 100 index decreased 0.3% to 7,412.09. 

The yield on 10-year German Bunds inched higher to 2.42%, French bonds traded lower to 2.98%, the UK gilts edged up to 4.38% and Italian bonds increased to 4.13%.

European currencies were stable after the dollar index declined 2% in the previous week and extended four month loss to 4%. 

The euro edged higher to $1.12, the British pound to $1.30 and the U.S. dollar fetched 85.87 Swiss cents

Crude oil prices eased after Libya resumed its production over the weekend. 

Brent crude decreased $1.60 to $78.76 a barrel and the Dutch TTF natural gas decreased €0.86 to €25.10 per MWh.

 

Europe Stock Movers

Mining and resource companies traded lower in London after China reported weaker-than-expected economic growth. 

Anglo American, Glencore, Antofagasta declined between 1.5% and 3% after crude oil prices declined 1% and copper fell 3%. 

Luxury stocks in Paris also declined following the weak retail sales growth in China.

Kering SA declined 1.9% to €490.70, Hermes International SCA dropped 3.9% to €1,916.80 and LVMH fell 4.2% to €854.30.  

Carlsberg SA declined 1.2% to €136.60 after the Russian government took control of its stake in a local brewery. 

UK home builders resumed the decline after the property listing platform Rightmove said that average newly listed property price declined by £905 to £371,907. 

Taylor Wimpey decreased 0.6% to 104.20 pence, Barratt Developments dropped 0.7% to 410.60 pence and Persimmon Plc fell 0.7% to 1,052.80 pence.   

Richemont SA plunged 9% to CHF 140.0 after the Swiss luxury company reported a decline in U.S. demand in its latest quarter. 

Sales in the first quarter ending in June rose 14% to €5.3 billion, or rose 19% in constant exchange rate. 

Sales in Europe increased 10% to €1.1 billion, in Asia Pacific soared 32% t0 €2.2 billion, Japan advanced 6% to €424 million, but fell 4% in the Americas to €1.1 billion. 

Entain Plc declined 1,262.0 pence after the UK-based company agreed to acquire the U.S.-based Angstrom Sports for £122 million or 160 million.