Weak Consumer Sentiment Weighs On European Markets, Euro Drifted Lower

Bridgette Randall
27 Sep, 2023
Frankfurt

European markets lacked direction for the second week in a row on the ongoing interest rate uncertainties and looming economic slowdown. 

Benchmark indexes in Paris, London and Frankfurt diverged but traded in a tight range and the euro drifted to a new six-month low. 

The yield in the euro bond markets hovered near 12-year highs and investors debated the central bank's next move and terminal rate levels. 

In the last two weeks, investors have suddenly shifted their views on rate path and terminal rates after policymakers stressing for months that higher rates are here to stay. 

The yields on Germany, French and Italian bonds jumped to the levels last seen 12 years ago, and investors are bracing for higher rates in the months ahead. 

In economic news in the region, the latest survey of German consumers suggested high inflation is impacting consumer morale and consumer sentiment is not expected to improve in the rest of the year. 

The forward-looking consumer climate index declined to -26.5 in October, from a revised -25.6 fall in the prior month.

The chances that consumer sentiment can sustainably recover before the end of this year are dwindling more and more," said Rolf Bürkl, GfK consumer expert. 

"Private consumption will therefore not make a positive contribution to overall economic development this year,” Burki added. 

 

Europe Indexes & Yields

The DAX index decreased 0.2% to 15,220.95, the CAC-40 index decreased 0.02% to 7,071.67 and the FTSE 100 index decreased 0.3% to 7,603.78. 

The yield on 10-year German bonds increased to 2.78%, French bonds traded higher to 3.34%, the UK gilts edged up to 4.29% and Italian bonds rose to 4.69%.

The euro edged lower to a three-month low to $1.055, the British pound to $1.214 and the U.S. dollar fetched 91.71 Swiss cents.

Brent crude decreased $1.04 to $95.0 a barrel and the Dutch TTF natural gas edged lower €0.62 to €39.70 per MWh.

 

Europe Stock Movers 

H&M Group AB jumped 3.2% to skr 159.82 after the Swedish retailer said it plans to buy back its class B shares for 3 billion kronor starting September 27. 

NN Group declined 14.6% to €30.89 after the largest insurance group of the Netherlands said that the latest court ruling could have adverse material impact on its financial health. 

A court in Hague ruled that the company had not provided enough information about the investment-linked insurance products, reversing the earlier ruling in 2017. 

The ruling also dragged rival Dutch insurance companies ASR Nederland by 9.8% to €36.58 and Aegon NV by 0.8% to $4.86.