European Markets Rebounded After German Wholesale Deflation Accelerated, UK Inflation Eased

Bridgette Randall
20 Sep, 2023
Frankfurt

European markets rebounded after investors reacted positively to inflation reports from Germany and the U.K.

Positive market sentiment was in check ahead of the U.S. Federal Reserve's rate decision later today and the Bank of England's rate announcement Thursday. 

Despite the improvement in inflation in the last seven months, the rebound in crude oil and natural gas prices in the last five weeks stoked fears of another bout of inflation. 

Crude oil prices are hovering at one-year highs and natural gas prices have rebounded from the lows in June. 

Additionally, investors reacted positively after passenger car registration in August was in double digits, despite the decline in registration rate from a year ago. 

 

Record Decline In German PPI

German producer price index declined at a record pace in August since data collection began in August, the Federal Statistical Office or DeStatis reported Wednesday. 

The producer price index dropped 12.6% from a year ago, largely because of a base effect reflecting higher prices last year, and the decline accelerated for the second month in a row after falling 6.0% in the previous month. 

Energy prices dropped 31.9% and electricity prices fell 43.2%. 

However, the core rate of producer price index, which excludes energy prices, rose 1.2%. 

On a monthly basis producer prices rose 0.3% in August, the first rise in four months.  

 

UK Inflation Rate Drops to 18-month Low

Consumer price inflation in the U.K. slowed to 6.7% in August from 6.8% in the previous month, the Office for National Statistics reported Wednesday. 

The inflation rate fell to the slowest pace since February 2022 after food prices rose at a slower pace and housing cost declined.  

Core rate of inflation, which excludes volatile food and energy prices, eased to 6.2% from 6.9% in the previous, the lowest level since March. 

On a monthly basis, consumer price inflation rose 0.3%. 

 

Passenger Vehicle Registration Expanded In August 

Passenger car registrations in the European Union rose 21% from a year ago to 787,600 units in August, the European Automobile Manufacturers Association or ACEA reported Wednesday. 

Sales in August are generally slower, but a double-digit increase in registration suggested that pandemic-era component shortages are finally easing and automakers are able to meet higher demand. 

Vehicle registration rose for the thirteenth month in a row in August and market share of battery-electric cars rose above 20% for the first time and surpassed diesel cars for the second time this year. 

Passenger vehicle registration increased in double-digits in most markets, including in the three largest markets in the region, with registration rising in Germany by 37.3%, in France by 24.3%, and in Italy by 11.9%. 

Battery electric car registrations in the European Union soared 118.1% to 165,200 vehicles in August, about 21% of the market. 

For the first eight months of the year, EU passenger car registrations rose 17.9% from the same period a year ago to 7.1 million units. 

Despite the improvement in sales this year, sales are still lower than the pre-pandemic level of 9.0 million units sold in 2019.  

 

Europe Indexes & Yields

The DAX index increased 0.6% to 15,753.82, the CAC-40 index advanced 0.4% to 7,310.83 and the FTSE 100 index inched up 0.8% to 7,718.97. 

The yield on 10-year German bonds increased to 2.71%, French bonds traded higher to 3.26%, the UK gilts edged down to 4.26% and Italian bonds rose to 4.49%.

The euro edged lower to a three-month low to $1.069, the British pound to $1.237 and the U.S. dollar fetched 89.74 Swiss cents.

Brent crude decreased $0.83 to $93.49 a barrel and the Dutch TTF natural gas increased €0.13 to €36.65 per MWh.