European Markets Advanced and Energy Prices Stayed Elevated

Bridgette Randall
10 Aug, 2023
Frankfurt

European markets traded higher and investors reacted to regional corporate earnings. 

Market averages in London, Paris and Frankfurt rebounded and banks continued to recover following losses two days ago after the Italian finance minister announced a cap on windfall tax. 

Bond yields were stable ahead of the release of the U.S. inflation report later today. 

Traders are looking for overall inflation to edge slightly higher but it is the core inflation that will drive the market sentiment. 

Overall inflation has declined sharply from close to 9% high in August 2022 and has steadily fallen to below 4% reflecting the weakness in crude oil prices. 

But core inflation has stayed near 4%, significantly higher than the Fed's preferred level of 2%, making some traders worried that the central bank may abandon its long standing target. 

Crude oil prices traded near a 9-month high on the tighter supply conditions and natural gas prices soared on the worries that global supplies worries.   

 

Europe Indexes & Yields

The DAX index increased 0.4% to 15,919.91, the CAC-40 index rose 0.9% to 7,388.29 and the FTSE 100 index added 0.07% to 7,591.98.  

The yield on 10-year German bonds increased to 2.49%, French bonds traded higher to 3.06%, the UK gilts edged up to 4.37% and Italian bonds increased to 4.17%.

The euro edged lower to $1.102, the British pound to $1.272 and the U.S. dollar fetched 82.62 Swiss cents.

Natural gas prices jumped to a two-week high after LNG flows to terminals in the U.S. eased and traders are forecasting supplies from the U.S. are likely to be diverted to Asia in the next three months because of higher prices. 

Despite the recent surge in prices, natural gas storage across the European Union is near a record 87% level and regulators are aiming for 90% level before the end of November to meet demand next winter. 

Germany, Italy and Spain are at or near levels set by the EU authorities and France is expected to catch up in the next few weeks. 

Brent crude decreased $0.11 to $87.40 a barrel and the Dutch TTF natural gas decreased €0.48 to €39.44 per MWh.

 

Europe Stock Movers

Zurich Insurance Group AG increased 1.8% to CHF 427.90 after the Swiss company reported strong results in the first-half. 

Allianz SE jumped 2.9% to €220.75 after the German company reported better-than-expected profit increase in the second quarter. 

Novo Nordisk AS decreased 1.9% to DKK 1,239.0 after the maker of weight loss blockbuster drug Wegovy  extended supply restrictions in some areas for some doses.

Siemens AG declined5.4% to €138.18 after the German engineering group reported weaker-than-expected profit in the latest quarter. 

Thyssenkrupp AG increased4.5% to €6.99 after the company estimated 2023 operating earnings are likely to be towards the upper end of the range. 

Hapag Lloyd AG declined 3.4% to €186.10 after the container shipping company said profit in the first-half fell 67% from a year ago. 

Antofagasta Plc jumped 1.5% to 1,631.0 pence after the company reported better-than-expected sales and earnings growth and increased its shareholder payout. 

Luxury stocks in Paris advanced and Hermes and LVMH jumped between 1% and 2.5% after China permitted group tours to South Korea for the first time since 2017. 

Entain Plc  rose 1% to 1,371.0 pence after the gambling company swung to a pre-tax loss of £502.5 million from a profit of £28.1 million a year ago.

Persimmon Plc increased 3.4% to 1,160.0 pence after the UK-based home builder forecasted annual profit in line with market expectations.