European Markets Struggled Amid Weakening Global Economic Backdrop

Bridgette Randall
14 Aug, 2023
Frankfurt

European markets traded sideways and gains were muted after bond yields advanced for the second week in a row and commodities and crude oil prices edged lower. 

The benchmark indexes in Frankfurt, Paris and London traded higher in choppy trading on the hopes that inflation will stay near recent lows and the Euro Area economy may avoid a deeper recession. 

The rise in bond yields suggested that the bond market is looking for rates to go higher, contrary to the stock market expectations. 

German wholesale prices declined 2.8% in July after falling at an annual rate of 2.9% in June, the Federal Statistics Office reported Monday.  

Wholesale prices declined for the fourth month in a row and on a monthly basis prices fell 0.2%, matching the rate in June. 

In other news closer to the region, the Russian ruble plunged to 101.0 against the U.S. dollar, and extended this year's decline to 38% on the growing list of negative factors. 

Rising government deficit, mismatch of imports and exports receipts and the expectations of weakening demand for energy from China and India contributed to the negative sentiment for the ruble. 

Russia's current account surplus plunged 85% in the period between January and July from a year ago, denting the sentiment further. 

In Asia, markets were under pressure after the Japanese yen traded above 145 against the U.S. dollar and China's two best-known property developers missed bond payments. 

Country Garden halted trading in at least dozen on-shore bonds and the state-controlled Sino-Ocean suspended trading in debt notes due next year after the company missed interest payments of $21 million. 

The woes of China's property market dragged commodities prices lower in London trading. 

 

Europe Indexes & Yields

The DAX index increased 0.5% to 15,915.80, the CAC-40 index rose 0.2% to 7,357.19 and the FTSE 100 index fell 0.4% to 7,494.84.  

The yield on German government bonds traded at a one-month high, lifting yields in the region for other nations as traders assessed inflation risks. 

The yield on 10-year German bonds increased to 2.60%, French bonds traded higher to 3.14%, the UK gilts edged up to 4.52% and Italian bonds increased to 4.22%.

The euro edged lower to $1.03, the British pound to $1.263 and the U.S. dollar fetched 87.73 Swiss cents.

Brent crude decreased $0.21 to $86.60 a barrel and the Dutch TTF natural gas decreased €0.58 to €35.88 per MWh.

 

Europe Stock Movers

Antofagasta, Glencore and Anglo America declined more than 1% on the no end in sight of property woes in China, reiterating fears that the expected rebound in Chinese demand is not likely to materialize. 

Weakening crude oil prices dragged energy companies Shell PLC, TotalEnergies and BP Plc down by 1 %. 

Adesso SE jumped 9.2% to €111.20 after the information processing outsourcing services company reported a rise in its first-half operating earnings and the company reiterated its 2023 outlook. 

Koninklijke Philips NV jumped 3.9% to €19.16 after the Dutch investment company Exor controlled by Italy-based Agnelli family invested $2.8 billion or 15% stake in the embattled healthcare technology company.