European Markets Rebounded After Inflation Dropped to 2-year Low

Bridgette Randall
29 Sep, 2023
Frankfurt

European markets rebounded after several inflation reports in the currency union showed easing inflation pressures. 

Benchmark indexes have been under pressure for several weeks on the worries of elevated inflation and higher interest rates. 

But the latest report on inflation in the currency union showed that the cooling inflation trend is still in place after inflation peaked above 10% in October 2022. 

Consumer price inflation has been falling every month since October except April 2023 largely because of higher prices in the previous month and weakening energy prices. 

However, the inflation backdrop is changing and crude oil and natural gas prices have started to rebound from September which could pause the current declining trend. 

On Thursday, Spain's statistical agency said inflation accelerated for the third month in a row to 3.5% in September and Germany's statistical agency said inflation eased to 4.5% from 6.1% in the previous month. 

 

Euro Area Inflation Slowed In September 

The Euro Area consumer price inflation eased to 4.3% in September from a year ago, Eurostat reported Friday.

Consumer price inflation dropped to the slowest pace since October 2021, according to the preliminary estimate released by the statistical agency.   

The Service sector inflation slowed to 4.7% from 5.5% in August and food, alcohol and tobacco prices rose at a slower pace of 8.8% from 9.7% in the previous month. 

The fall in energy prices accelerated to 4.4% from 3.3% in the previous month.   

Core rate of inflation, which excludes food and energy prices, slowed to 4.5% from 5.3% in the previous month.   

 

UK Economic Growth Revised Higher

U.K.'s economy grew at a faster than previously estimated rate in the first quarter of 2023, the Office for National Statistics reported Friday. 

First quarter GDP growth was revised higher to 0.3% from 0.1% and second quarter growth was left unrevised at 0.2%.  

For 2022, GDP growth rate was revised higher to 4.3% from the previous estimate of 4.1%. 

The higher economic growth estimate suggested that the British economy is 1.8% larger at the end of June 2023 compared to the last quarter of 2019, the last full quarter before the onset of Covid-19 pandemic. 

 

Europe Indexes & Yields

The DAX index increased 1.03% to 15,480.90, the CAC-40 index advanced 1.1% to 7,193.09 and the FTSE 100 index added 0.9% to 7,666.67. 

The yield on 10-year German bonds increased to 2.85%, French bonds traded higher to 3.14%, the UK gilts edged up to 4.45% and Italian bonds rose to 4.77%.

The euro edged lower to a three-month low to $1.06, the British pound to $1.22 and the U.S. dollar fetched 91.13 Swiss cents.

Brent crude increased $0.82 to $93.92 a barrel and the Dutch TTF natural gas edged higher by €2.61 to €42.35 per MWh.

 

Europe Stock Movers 

Commerzbank AG soared 11.5% after the German bank said it plans to revise its shareholder payout policy in the near future. 

Aston Martin Lagonda Global Holdings PLC jumped 13.4% to 296.0 pence after the Yew Tree consortium announced to purchase an additional stake of 3.27% or 26 million shares in the luxury automobile company. 

3i Infrastructure gained 0.6% to 306.70 pence after the company said it is on track to deliver its fiscal 2024 dividend target of 11.90 pence per share.  

Future Plc jumped 20.9% to 863.50 pence after the print and online media company reiterated its annual earnings outlook. 

Severn Trent jumped 6.8% to 2,419.0 pence after the waste water treatment company said it plans to invest 12.9 billion over the next five fiscal years.

Syncona advanced 8.9% to 115.67 pence after the company announced a stock repurchase plan.