European Markets Traded Near One-week Low, Producer Price Inflation Accelerated Decline

Bridgette Randall
05 Sep, 2023
Frankfurt

European market indexes traded at a one-week low on global economic slowdown worries and future rate hike worries. 

Market indexes in London, Paris and Frankfurt eased after business activity growth weakened more in August as the manufacturing slowdown expanded to the service sector. 

HCOB's final Composite Purchasing Managers' Index declined to 46.7 in August from 48.6 in July, S&P Global reported today. 

The index dropped to the lowest level since November 2020 as service sector weakness added to the manufacturing sector. 

The U.K. services PMI fell to 49.50 from 51.50 in July, the lowest reading since January.

Producer prices in the Euro Area accelerated to a decline of 7.6% from a year ago in July from the 3.4% decrease in the previous month, the Eurostat reported Tuesday. 

The measure of wholesale prices declined for the third consecutive month and fell at the fastest pace since 2009, largely due to base effects after energy prices soared following Russia's invasion of Ukraine. 

Energy prices plunged 24.2% from the 16.4% in the previous month, while producer costs declined at a slower pace for intermediate goods. 

However, inflation slowed for industries producing capital goods to 4.7% from 5.3%, durable consumer goods to 5.1% from 5.9%, and non-durable consumer goods to 7.6% from 8.8%. 

On a monthly basis, producer prices in the Euro Area decreased 0.5%, the seventh monthly decline in a row, extending the 0.4% drop in the previous month.

 

Europe Indexes & Yields

European markets have been on the decline for the last five weeks on the worries of economic slowdown and higher interest rates that could dip the economy into a deeper recession. 

The DAX index decreased 0.1% to 15,804.41, the CAC-40 index fell 0.3% to 7,260.80 and the FTSE 100 index advanced 0.1% to 7,459.99.

The yield on 10-year German bonds increased to 2.60%, French bonds traded higher to 3.12%, the UK gilts edged up to 4.49% and Italian bonds rose to 4.32%.

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 $1.070, the British pound to $1.255 and the U.S. dollar fetched 88.90 Swiss cents.

Brent crude decreased $0.55 to $88.54 a barrel and the Dutch TTF natural gas declined €0.12 to €33.45 per MWh.

 

Europe Stock Movers

Renault SA jumped 2% to €35.50 after the electric vehicle unit may be valued  as high as €10 billion in its initial public offering, chief executive Luca de Meo said. 

Ashtead Group decreased 2.7% to 5,322.0 pence after the UK-based equipment rental company lowered  its UK revenue outlook. 

Headlam Group Plc increased 2.7% to 224.84 pence after the floorcoverings distributor reported higher first-half revenue and reiterated its full-year revenue outlook.    

Luxury companies LVMH and Hermes  in Paris traded down between 1% and 2% on the worries of uneven economic recovery. 

China's service sector growth dropped to the lowest level in eight months after exports weakened and new orders growth slowed. 

Skanska AB increased 4.3% to kr 166.20 after the Swedish construction company won a $834 million highway improvement project in the U.S. 

ABN AMRO Bank NV increased 0.2% to €13.59 and the Dutch bank said it plans to appoint current interim chief financial officer Ferdinand Vaandrager permanently.