Euro Area GDP Accelerated In Second Quarter, Inflation Eased In July

Bridgette Randall
31 Jul, 2023
Frankfurt

Market averages across Europe traded higher and investors reviewed the latest updates on GDP and inflation. 

Benchmark indexes in Frankfurt, Paris and London advanced after the Euro Area core inflation eased and GDP improved and net mortgage approvals rose the U.K. 

 

Euro Area Core Inflation Above Overall Inflation In July 

The Euro Area inflation slowed for the third month in a row to 5.3% in July from 5.5% in June, the statistical agency Eurostat reported Monday. 

The ongoing decline in energy prices drove the overall inflation lower, but service inflation rose and core inflation was above overall inflation for the first time since 2021. 

Energy prices declined at a faster pace of 6.1% in July compared to 5.6% decline in June, service inflation accelerated to 5.6% from 5.4% respectively. 

Core inflation which excludes food, energy, alcohol and tobacco, was unchanged at 5.5% in the month. 

Despite the cooling of inflation, prices are still rising at a faster pace than the level of 2% preferred by the European Central Bank, suggesting an aggressive rate hike campaign to continue.  

 

Euro Area Economic Growth Accelerated In Second Quarter  

The Euro Area economy expanded by 0.3% in the second quarter from the previous quarter, after waning inflation supported a slight rise in consumer spending, Eurostat reported today. 

From a year ago, the eurozone economy rose 0.6%, the weakest pace of expansion since the recession over two quarters ending in the first quarter of 2021.  

The economic growth picked up in the quarter after flat growth in the first quarter and Germany's economy stagnated and growth in France accelerated but slowed in Spain. 

Italy's economy contracted  by 0.3% in the second quarter following a rise of 0.6% in the previous period, the statistical agency ISTAT said Monday.

On an annual basis, the economy expanded at 0.6%, extending the advance to the 10th quarter in a row but at the slowest pace. 

Prior to the announcement, the Bank of Italy forecasted annual economic growth to rise 1.3%, higher than 1.2% growth projected by the Prime Minister Giorgia Meloni's government.  

 

UK Mortgage Approvals Increased in June 

Home mortgage approvals rose in June in the UK, as buyers rushed to lock in rates ahead of the rise in interest rates over the next several months. 

Net home mortgage approvals increased to 54,700 in June, higher than the revised 51,100 in May, the Bank of England reported Monday.    

However, the approvals for mortgage refinancing with a different lender increased to 39,100 from 34,100 in the respective periods.  

The effective mortgage rate on a new contract increased 7 basis points to 4.63% in June and the rate on the outstanding mortgage stock rose 10 basis points to 2.92%. 

 

Europe Indexes & Yields

The DAX index increased 0.1% to 16,484.34, the CAC-40 index jumped 0.5% to 7,510.99 and the FTSE 100 index decreased 0.06% to 7,689.35.  

The yield on 10-year German bonds increased to 2.48%, French bonds traded higher to 3.05%, the UK gilts edged up to 4.34% and Italian bonds increased to 4.12%.

The euro edged lower to $1.10, the British pound to $1.281 and the U.S. dollar fetched 87.02 Swiss cents

Brent crude increased $0.71 to $85.12 a barrel and the Dutch TTF natural gas increased €1.47 to €27.32 per MWh.

 

Europe Stock Movers

Heineken NV declined 7.1% to €89.98 after the brewing company lowered its 2023 earnings outlook. 

Diageo and Anheuser Busch InBev fell more than 1% after Heineken lowered its earnings guidance.  

Novo Nordisk AS advanced 0.7% to $157.82 after the company launched its weight loss drug Wegovy in Germany. 

Senior Plc declined 2.1% to 166.80 pence despite the automobile and aircraft parts supplier reporting higher profit in the first-half profit. 

Marshalls Plc fell 5.2% to 261.72 pence after the building and roofing products company lowered its annual outlook. 

BT Group declined 1.9% to 121.70 pence after the company appointed Allison Kirkby as its new chief executive.