European Bonds Rebounded, Eurozone Output Declined at the Fastest Pace In Three Years

Bridgette Randall
24 Oct, 2023
Frankfurt

European markets turned higher after bond yields edged lower as investors reviewed regional economic data.

Benchmark indexes in Paris and Frankfurt advanced, but indexes in London lacked direction.

The Eurozone output contracted the most in nearly three years, according to the latest data compiled by S&P.

The HCOB Eurozone Composite PMI fell to 46.5 in October from 47.2 in September, the fifth monthly decline in a row in business activities.

Activities in both the manufacturing and service sectors declined, and the fall in activities was the steepest since November 2020 and sharpest since March 2013, when pandemic-era disruptions were excluded.

New orders declined the most since May 2020, and backlogs of orders eased at the fastest pace since June 2020.

Separate reports showed a mixed economic picture in the UK and Germany.

German consumer confidence declined for a third month in a row in November, and the UK's private sector activity contracted for the third month in a row, and the adjusted jobless rate edged up.

 

UK Jobless Rate Edged Higher 

The adjusted unemployment rate for the three months to August increased to 4.2%, following a 4.0% rate in the previous three months ending in May, the Office for National Statistics reported Tuesday.

The adjusted employment rate decreased by 0.3 percentage points to 75.7%, and economic inactivity edged up 0.1 percentage point to 20.9%, as the report highlighted.

Last week, the statistical agency reported that the average earnings growth in the three months to August in the UK eased slightly to 8.1% from 8.5% in the previous period, but the increase was still one of the largest gains since record-keeping began in 2001.

 

Europe Indexes and Yields

The DAX index increased 0.1% to 14,822.20, the CAC-40 index rose 0.5% to 6,886.58, and the FTSE 100 index eased 0.01% to 7,374.21.

The yield on 10-yetrar German bonds decreased to 2.81%, French bonds traded lower to 3.43%, the UK gilts edged down to 4.56%, and Italian bonds eased to 4.81%.

The euro hovered near a three-month low at $1.06, the British pound at $1.22, and the U.S. dollar at 89.34 Swiss cents.

Brent crude increased $0.29 to $90.12 a barrel, and the Dutch TTF natural gas edged higher by €0.42 to €51.68 per MWh.

 

Europe Stock Movers

UniCredit SpA increased 1.3% to €22.99, and the Italian bank reported third-quarter earnings that were ahead of market expectations.

Logitech International SA increased 7.7% to CHF 66.22 after the Swiss computer accessories maker revised higher its annual outlook.

Anglo American, Glencore, and Antofagasta advanced between 0.6% and 0.9% after the U.S. dollar weakened and base metal prices edged higher.

Barclays Plc declined 6.5% to 135.22 pence after the U.K.-based lender warned that the financial services provider is facing margin pressures, and the bank said it plans to accelerate its plan to cut costs later in the year.

Lloyds Banking Group declined 1.9% to 40.66 pence, and NatWest Group Plc dropped 2.2% to 210.20 pence.

Puma SE soared 3.8% to €52.76 after the German sportswear maker reiterated its full-year outlook.

Hermes International SCA advanced 2.3% to €1,720.60 after the luxury goods maker reported third-quarter sales that were ahead of the market's expectations.

Bunzl Plc fell 3.8% to 2,802.0 pence after the distribution services provider said third-quarter revenue declined 4.8% at constant currency exchange rates.

"We reiterate our confidence in the group’s 2023 adjusted operating profit being moderately higher than in 2022 at constant exchange rates.

We expect Group revenue, at constant exchange rates, to be slightly lower than in 2022, with the benefit of announced acquisitions offset by some organic decline, following strong organic growth in recent years, and a small impact from UK healthcare disposal.

The operating margin in 2023 is now expected to reach the record level seen in recent years," the company said in an update to investors released Tuesday.