Lingering Economic Worries and Rising Bond Yields Keep European Stocks Down

Bridgette Randall
23 Oct, 2023
Frankfurt

European markets extended the previous week's losses, and bond yields continued to advance.

Benchmark indexes in Paris, Frankfurt, and London fell between 0.3% and 0.7%, and bond yields in the Euro Area rose following the rise in 10-year U.S. Treasury notes.

European market indexes continued to drift lower on the rate uncertainties, looming economic slowdown and worries of resurgent inflation following the rebound in crude oil prices.

The European Central Bank's policy committee is scheduled to meet in Athens, and investors are anticipating no change in rates at the end of the meeting on Thursday.

However, the outlook for interest rates is highly uncertain because inflation is significantly ahead of 2%, despite multiple rate hikes by the European Central Bank and the Bank of England.

The rate uncertainties, combined with the recent rebound in crude oil prices, are keeping investors nervous as earnings season rolls on.

 

Europe Indexes and Yields

The DAX index decreased 0.8% to 14,679.77, the CAC-40 index fell 0.2% to 6,802.85, and the FTSE 100 index dropped 0.6% to 7,354.99.

The yield on 10-yetrar German bonds increased to 2.94%, French bonds traded higher to 3.56%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.95%.

The euro hovered near a three-month low at $1.06, the British pound at $1.216, and the U.S. dollar at 89.20 Swiss cents.

Brent crude decreased $0.31 to $91.82 a barrel, and the Dutch TTF natural gas edged lower by €2.40 to €48.72 per MWh.

 

Europe Stock Movers

In Paris trading, banks led the decliners on the worries of higher interest rates, adding to the losses in bond portfolios held by banks.

BNP Paribas, Societe Generale, and Credit Agricole traded between -0.3% and 0.3%.

Renault SA extended losses to the second week and fell 1.5% to €32.74 after currency losses in Turkey and Argentina overwhelmed the overall results.

Mining and energy companies led the decline in London trading after market indexes in Shanghai, Shenzhen, and Hong Kong dropped to multi-month lows.

Anglo American, Antofagasta, Glencore, and Fresnillo dropped between 1% and 2.5%.

Homebuilders were also among the leading decliners in London trading after bond yields advanced in the U.K. and raised the prospect of another cycle of mortgage rate hikes.

In Frankfurt, Commerzbank and Deutsche Bank were among the leading decliners, with losses of 0.4%.

Vehicle makers were among the leading decliners on the twin worries of a looming global economic slowdown and rising competition from electric vehicle makers in China.

Volkswagen Group declined 1.6% to €101.50, Mercedes Benz dropped 0.5% to €61.46, and Porsche Automobil Holding SE fell 2.2% to €43.62.