Worries of Wider Conflict In Middle East Extended Weekly Losses In European Markets

Bridgette Randall
20 Oct, 2023
Frankfurt

European markets extended weekly losses after crude oil prices advanced following worries of a widening conflict in the Middle East.

The prospect of the Israel-Hamas war spreading to neighboring countries kept investors on the sidelines after protests erupted in Iran, Iraq, Lebanon, Egypt, and Turkey.

Moreover, a U.S. Navy ship in the Red Sea intercepted missiles and drones fired by Iran-backed Huthi rebels in Yemen.

The wider conflict in the Middle East could disrupt crude oil supplies in the region and put additional pressure on prices.

In addition, the U.S. is planning to buy six million barrels of crude oil to replenish its strategic oil reserves with deliveries in December and January.

To facilitate the purchase, the U.S. eased sanctions on the Venezuelan oil sector as the oil market is struggling with production cuts extended till the end of 2023 by the two largest oil exporters, Russia and Saudi Arabia.

On the economic front, investors reviewed the sharp decline in Germany's producer price index and the fall in the UK's retail sales.

 

The German wholesale price index dropped at a record pace

Germany's producer price index fell at record pace for the second month in a row in September, largely because of the higher price base a year ago, the Federal Statistics Office reported Friday.

Producer prices fell 14.7% in September from a year ago, following a 12.6% decline in August.

The measure of wholesale price declined for the third month in a row, and prices fell at the fastest pace since record-keeping began in 1949.

On a monthly basis, producer prices declined 0.2% after rising 0.3% in August.

 

UK Retail Sales Declined In September.

Retail sales in the U.K. declined 0.9% in September from August, the Office for National Statistics reported Friday.

The cost of living crisis combined with unusually warm weather dragged down non-food store sales by 1.9% in the month, including sales at furniture, jewelry, watches, apparel, and department stores.

Food-store sales increased by 0.2%, and fuel sales rose by 0.8%.

On an annual basis, retail sales declined 1%, the smallest decline since sales started dropping in April 2022.

 

EU car Registrations Expanded In September 

New car registration in the European Union increased 9.2% to 861,062 units, the European Automobile Manufacturers' Association reported Friday.

New car registration increased for the fourteenth month in a row as supply chain disruptions eased.

Passenger car registrations soared 22.7% from a year ago in Italy and jumped 10.7% in France, but declined 0.1% in Germany.

Petrol-fueled passenger cars led the registrations, but market share decreased to 34.1% from 35.3% a year ago, followed by hybrid-electric cars with 27.3% and battery-powered cars with 14.8%.

 

Europe Indexes and Yields

The DAX index decreased 1.2% to 14,860.79, the CAC-40 index fell 1.2% to 6,835.88, and the FTSE 100 index dropped 0.7% to 7,447.13.

The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.94%.

The euro hovered near a three-month low at $1.058, the British pound at $1.212, and the U.S. dollar at 89.16 Swiss cents.

Brent crude increased $1.0 to $93.37 a barrel, and the Dutch TTF natural gas edged higher by €1.70 to €51.87 per MWh.

 

Europe Stock Movers

Husqvarna AB Class B declined 7.7% to 73.04 kronor after the Swedish garden equipment reported third-quarter revenue that fell short of market expectations.

In addition, the company announced 300 job cuts.

Sika AG increased 0.3% to CHF 218.80 after the Swiss chemical company reiterated its fiscal 2023 outlook.

L'Oreal SA declined 1.3% to €381.05 after the French cosmetic company's third quarter sales fell short of market expectations.

Vivendi SE advanced 2.5% to €8.46 after the French media company said third-quarter sales rose 2.5% to 2.43 billion from 2.37 billion a year ago.

Canal + Group revenue in the quarter increased 5.7%, and Havas Group revenue increased 4.5%, driven by increases in all divisions in the group.

InterContinental Hotels Group decreased 3.6% to 5,931.0 pence after the company said new hotel developments are on hold till the company is able to arrange short-term financing.