European Markets Fall for Fourth Day and Third Week In a Row

Bridgette Randall
18 Aug, 2023
Frankfurt

European markets struggled after investor sentiment shifted from optimism to more caution. 

Market averages declined in choppy trading as investors avoided stocks and lightened positions in some of their favorite sectors in the last nine months. 

Market mood soured on the growing worries that the U.S. high-for-longer rates are likely to pose another challenge for global growth and that could start another cycle of rate hikes around the world. 

Moreover, China's uneven economic rebound and worsening real estate market is likely to offer another hurdle for the global economic engine. 

China's largest real estate company Evergrande Group filed for bankruptcy protection in New York as it restructures its international debt. 

Just days ago Country Garden defaulted on its international debt and Sino-Ocean suspended trading on its several domestically denominated debts. 

The fear of contagion spreading to more real estate companies and widening to other sectors, dragged market indexes in Hong Kong and Shanghai but also swept lower market indexes in Europe and Asia. 

Closer to home, inflation in the Euro Area slowed to 5.3% in July from 5.5% in June, Eurostat confirmed on Friday and matched the rate estimated on July 31. 

Core inflation, which excludes volatile food and energy prices, held steady at 5.5% as previously estimated. 

Construction output declined 0.1% in June, reversing 0.2% rise in May, a separate report from Eurostat showed today.  

UK retail sales fell more-than-expected 1.2% on a monthly basis in July, reversing an 0.6% increase in June.

UK retail sales declined for the first time in four months.

On a yearly basis, the fall in overall retail sales deepened to 3.2% from 1.6% in June. 

 

Europe Indexes & Yields

The DAX index decreased 0.7% to 15,574.26, the CAC-40 index fell 0.4% to 7,164.11 and the FTSE 100 index declined 0.7% to 7,262.43.  

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 decreased to 2.62%, French bonds traded lower to 3.16%, the UK gilts edged down to 4.67% and Italian bonds decreased to 4.32%.

The U.S. dollar traded near a 2-month high after the minutes of the meeting held on July 25-26 raised the prospect of another rate hike at the next policy meeting. 

The euro edged lower to $1.08, the British pound to $1.267 and the U.S. dollar fetched 88.18 Swiss cents.

Brent crude increased $0.72 to $84.84 a barrel and the Dutch TTF natural gas decreased €0.90 to €35.93 per MWh.

 

Stock Movers

Novartis AG declined about 0.6% to CHF 89.36 after the Swiss drug maker said it plans to spin off its around October 4. 

Mining companies Antofagasta, Anglo American and Glencore declined between 2% and 3% after China's largest real estate company Evergrande Group filed for bankruptcy protection in New York. 

Suse SA soared 60% to €15.36 after the company said it plans to delist its stock from the Frankfurt Stock Exchange.