European Markets Struggled, Business Activities Contraction Accelerated

Bridgette Randall
23 Aug, 2023
Frankfurt

European markets trade sideways and investors were divided about the monetary policy outlook and rate path in the region. 

Market indexes in London, Paris and Frankfurt struggled to get their footings following the weak regional business activities. 

European market indexes have fallen in the last three weeks in a row on the rising natural gas prices, worries of higher interest rates and rekindling of inflation. 

Moreover, investors are also worried about the weak consumer spending growth amid rising prices for essential products and elevated housing costs. 

 

Euro Area Business Activities Dropped at Fastest Pace In Nearly 3 Years

The HCOB Eurozone Composite PMI declined to 47.0 in August from 48.6 in the month ago, according to the preliminary estimate released by Markit Economics.  

The latest reading showed the fastest contraction in the region's private sector activity since November 2020. 

Manufacturing output contracted at the second-fastest pace over the past 11 years, trailing only to the early COVID-19 lockdowns, and services output fell for the first time since last December. 

Total new business inflows fell for a third straight month, with the rate of decline gathering pace to the steepest since November 2020, and the pace of job creation weakened to the lowest since February 2021. 

However, Inflationary pressures increased in August, both in terms of average selling prices and input costs. 

Finally, companies’ expectations of output levels in the coming year fell for the sixth month in a row, falling to the lowest since last December.

 

Europe Indexes & Yields

The DAX index decreased 0.08% to 15,693.44, the CAC-40 index decreased 0.1% to 7,233.70 and the FTSE 100 index edged higher 0.7% to 7,323.87.

The yield on 10-year German bonds increased to 2.55%, French bonds traded lower to 3.08%, the UK gilts edged down to 4.53% and Italian bonds decreased to 4.21%.

The euro edged lower to $1.082, the British pound to $1.261 and the U.S. dollar fetched 88.09 Swiss cents.

Natural gas prices traded volatile after local reports showed some progress between the workers' unions and Woodside Energy and Chevron in averting a long strike at LNG terminals. 

Brent crude decreased $1.20 to $82.82 a barrel and the Dutch TTF natural gas fell €4.82 to €38.11 per MWh.

 

Europe Stock Movers

Ithaca Energy Plc decreased 3.8% to 157.60 pence after the energy company reported a drop in revenue and earnings in the first-half. 

Cohort PLC increased 7% to 517.50 pence after the company's Systems Engineering & Assessment won a £17.5 million contract in the U.K. 

Nordex SE jumped 2% to €11.56 after the German wind turbine company secured three contracts from Heitkamp Industrial Solutions GmbH, a German construction subsidiary of Turkish contracting company Ronesans Enerji Holding for 189 MW. 

In Sivas, the group will install 7 turbines at the "Kayalar" wind farm (49 MW), while 8 turbines (56 MW) have been ordered for the "Osmancık" project in Çorum. 

The largest order is for 12 turbines with a total capacity of 84 MW for the "Sağıluşağı" wind farm in the province of Malatya in Eastern Anatolia.

Roche Holdings AG jumped 4.2% to CHF 263.50 after the company inadvertently published positive lung cancer drug trial data from an interim analysis. 

GSK plc rose 1.3% to 1,372.20 pence after the company reported positive results from its first efficacy trial for its shingles vaccine in China.