European Markets Trimmed 2% Fall On U.S. Fiscal Worries

Bridgette Randall
02 Aug, 2023
Frankfurt

European markets dropped mirroring losses in Asian markets after worries about U.S. fiscal management and growing debt resurfaced. 

Fitch Ratings lowered its credit rating to AA+ from AAA citing persistent governance issues. 

Rating agencies have been slow in downgrading the U.S. debt, despite more than a decade of weakening governance, rising debt levels and outsized military spending. 

Fitch also noted that the U.S. government deficit is expected to rise to 6.3% in 2023 from 3.7% in 2022. 

In stock trading, market indexes in Frankfurt, Paris and London declined more than 1% but the U.S. dollar held up. 

Closer to home, the number of people registering in Spain as unemployed declined by 10,968 to 2.68 million in July, the ministry of Labor and Social Security reported Wednesday. 

Unemployment declined for the fifth month in a row, reaching the level since 2008 when it was 2.62 million. 

A separate report from the ministry showed that 16,285 net formal jobs were added in July, increasing the total number of jobs to 20.71 million. 

Crude oil advanced to a 3-month high after an industry report suggested a 4-decade higher weekly drawdown of inventories last week. 

 

Crude Oil Advanced to 3-month High 

Crude oil prices rose to a three-month high after U.S. crude oil inventories declined by 15.4 million barrels last week, a report from American Petroleum Institute noted Tuesday. 

The decline in inventories significantly higher than expected  1.37 million barrels withdrawal in the week.  

If the industry association's withdrawal estimate is confirmed by the official data on Wednesday, it will be the largest drawdown in four decades in a week. 

Moreover, Saudi Arabia is also expected to announce an extension of its one million barrels per day production cut through September at the OPEC meeting on Friday. 

To arrest the rising energy prices, the Biden administration withdrew its offer to buy 6 million barrels of oil for the U.S. Strategic Petroleum Reserve.  

 

Europe Indexes & Yields

The DAX index decreased 1.4% to 16,016.88, the CAC-40 index fell 1.2% to 7,317.36 and the FTSE 100 index dropped 1.5% to 7,553.02.  

The yield on 10-year German bonds increased to 2.46%, 8rench bonds traded higher to 3.05%, the UK gilts edged up to 4.39% and Italian bonds increased to 4.15%.

The euro edged lower to $1.097, the British pound to $1.271 and the U.S. dollar fetched 87.81 Swiss cents

Brent crude increased $0.30 to $85.21 a barrel and the Dutch TTF natural gas increased €1.22 to €28.35 per MWh.

 

Europe Stock Movers

Mining companies traded down on the ongoing worries that demand growth from China is likely to remain weak for several quarters as policy makers struggle to devise new stimulus measures and revive moribund property market. 

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

Ferrexpo Plc declined 1.4% to 91.32 pence after the iron mining company reported a decline in pallet production in the first-half of 2023. 

BAE Systems Plc gained 4.6% to 976.60 pence after the defense contractor and military hardware maker reported strong financial results in the first-half and lifted its guidance for 2023.  

Siemens Healthineers AG declined 7.1% to €48.57 after the medical devices maker reported an unexpected decline in quarterly operating earnings but the company reiterated its full-year 2023 outlook.   

Schaeffler AG decreased 0.4% to €5.75 despite the German industrial and automotive products maker lifted its margin outlook for 2023 and supported sales growth estimates for the year. 

Hugo Boss AG decreased 1.1% to €72.16 despite the men's apparel company reporting higher sales and earnings in the second quarter and lifting its forecast for 2023. 

Taylor Wimpey Plc gained 3.2% to 117.80 pence after the company reported better-than-expected first-half results. 

 Roche Holding AG declined 1.0% to CHF 296.0 pence and Novartis AG dropped 1.0% to CHF 90.15 after two companies were engaged in a patent dispute. 

Roche's subsidiary Genentech accused Novartis unit Sandoz of infringing one of its patents.