European Markets Advanced, German Economy Stagnates In Second Quarter

Bridgette Randall
25 Aug, 2023
Frankfurt

European markets traded higher on the final day of the week and bond yields the euro edged down. 

Bond yields declined after investors speculated that the European Central Bank may pause rate hikes and avoid dipping the economy into a recession. 

Investors have been worried that policymakers are juggling to control inflation while keeping the economic expansion going and the labor market healthy. 

The European Central Bank's balancing act has so far avoided the region's economy dipping into a recession but inflation has still stayed significantly above the preferred level of 2%. 

 

German Economy Stagnates In Q2 

The German economy was flat in the second quarter compared to the previous quarter and declined 0.2% from a year earlier, the Federal Statistics Office or DeStatis reported today. 

GDP declined 0.6% after adjusted for price only, as there was one less working day in the second quarter compared to a year ago. 

The German economy stabilized after two quarters of decline when the economy contracted 0.1% in the first quarter and shrank 0.4% in the fourth quarter of 2022.  

Compared with the previous quarter, gross fixed capital formation in machinery and equipment increased 0.6%, slightly exceeding gross fixed capital formation in construction 0.2% after price, seasonal and calendar adjustment.

In the second quarter, seasonal, calendar and price adjustments, total exports of goods and services decreased  1.1% from the first quarter and the imports of goods and services remained unchanged in foreign trade.

In other economic news, the number of people registered as jobless in mainland France jumped 23,800 from the previous month to 2.817 million in July, the steepest increase since April 2021. 

The sharp jump in registered unemployed people lifted unemployment levels to their highest in the year sofar. 

 

Europe Indexes & Yields

The DAX index increased 0.3% to 15,667.25, the CAC-40 index advanced 0.5% to 7,252.73 and the FTSE 100 index edged higher 0.4% to 7,361.38.

For the week, the DAX index increased 0.4%, the CAC40 index advanced 0.7% and the FTSE 100 index gained 0.5%. 

The yield on 10-year German bonds decreased to 2.55%, French bonds traded lower to 3.08%, the UK gilts edged down to 4.45% and Italian bonds fell to 4.21%.

The euro edged to the lowest level since mid-June on the hopes that the central is more likely to pause its rate hike campaign and assess the impact of the multiple rate hikes on the economy. 

The euro edged lower to $1.079, the British pound to $1.256 and the U.S. dollar fetched 88.59 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 increased $1.23 to $84.68 a barrel and the Dutch TTF natural gas increased €2.21 to €34.20 per MWh.

 

Europe Stock Movers

CMC Markets Plc plunged 11.3% to 108.20 pence after the company estimated lower revenue trend in the fiscal year 2024 on demand weakness. 

LM Ericsson AB Class B jumped 0.2% to 54.0  Swedish krona after the company said it renewed a multi-year global patent cross-license with China-based Huawei Technologies Co, Ltd. 

Metals and energy stocks traded higher after base metal and crude oil prices advanced. 

BP Plc gained 1% to  478.50 pence and Shell Plc increased 0.7% to 2,384.60 pence.