Rate Pause Hopes Pushed Higher European Indexes Second Day

Bridgette Randall
15 Sep, 2023
Frankfurt

European markets rallied for the second day in a row on hopes that interest rates may be nearing peaks in the region. 

The European Central Bank lifted its three key lending rates for the tenth time on Thursday but revised higher its estimate of inflation for 2023 and 2024. 

Investors focused on the policy makers' assessment of the economy and hoped that the central bank is more likely to pause at its next policy meeting in November and review the cumulative impact of 450 basis points increase in interest rates since June 2022. 

 

Euro Area Wage Growth Slowed In Second Quarter 

Wages and salaries in the Euro Are rose 4.6% in the second quarter from an upwardly revised 4.9% in the first quarter, Eurostat reported Friday. 

Rising wages showed persistent inflationary pressures in the economy, but wages rose at a slower pace than 6.2% inflation rate, suggesting real income declined. 

Manufacturing wages rose at a slower pace of 3.9% in the second quarter compared to 4.8% in the first quarter construction wages stalled at 4.0% and  the information and communication wage growth eased to 4.6% from 5.0% and financial and insurance activities wage growth slowed to 4.0% from 4.8%. 

 

Italy Swung to Trade Surplus In July 

Italy swung to a trade surplus of €6.4 billion in July from a deficit of 0.5 billion a year ago, the National Institute of Statistics or ISTAT reported Friday. 

Exports declined 7.7% to €53.5 billion driven by a 57.8% fall in energy, 11.4% decrease in intermediate goods and 6.7% decline in consumer goods. 

Imports dropped 19.4% to €47.1 billion, primarily because of a 58% plunge in energy imports and intermediate goods decreased 18.1% and 4.1% decrease in consumer goods. 

 

Europe Indexes & Yields

The DAX index decreased 1.0% to 15,961.63, the CAC-40 index increased 1.6% to 7,425.67 and the FTSE 100 index inched up 0.9% to 7,738.88.

For the week, the DAX increased 0.7%, the CAC 40 advanced 1.6% and the FTSE 100 jumped 3.4%. 

The yield on 10-year German bonds increased to 2.65%, French bonds traded higher to 3.19%, the UK gilts edged up to 4.34% and Italian bonds rose to 4.41%.

The euro edged lower to a three-month low to $1.065, the British pound to $1.241 and the U.S. dollar fetched 89.62 Swiss cents.

Brent crude increased $0.46 to $94.16 a barrel and the Dutch TTF natural gas decreased €0.57 to €34.96 per MWh.

 

Europe Stock Movers

Luxury stocks advanced after China reported improving retail sales and industrial output data in August. 

LVMH, Kering SA, Hermes International SCA and Richemont SA jumped between 2% and 5%. 

H & M Hennes & Mauritz AB declined 4.3% to kr 164.16 after the Swedish retailer reported third quarter net sales below expectations. 

European automakers traded higher on the hopes that EU tariffs on the imported Chinese electric cars could help the regional companies. 

Renault, Mercedes, BMW and VW gained around 1%. 

Stellantis NV advanced 1.5% and the company's U.S. operations Chrysler is facing strike at some of its plants. 

Bayer AG increased 1.9% to €49.81 on news that the company is looking to cut management jobs and restructure its operations. 

Vinci SA increased 1.2% to €107.52 after the French company's subsidiary Vinci Construction Grands Projets won an order of €160 million contract to design and build a 180,000 m3 liquefied natural gas tank in The Netherlands.

Power Metal Resources PLC increased 4.2% to 85 pence after the company said there may be two significant gold deposits at its Tati mine in Botswana. 

Games Workshop Group Plc jumped 11.5% to 11,590.0 pence after the maker of the miniature Warhammer game said sales in its latest quarter were ahead of estimates.