Mixed Earnings Dragged Down European Markets, Spanish GDP Growth Slowed

Bridgette Randall
27 Oct, 2023
Frankfurt

Market indexes in Europe traded mixed in Friday's trading, and investors reviewed a mixed batch of earnings.

After a week of volatile trading, benchmark indexes lacked direction, the euro edged lower, and crude oil prices rebounded in active trading.

On Thursday, the European Central Bank paused its interest rate hike for the first time in a year after lifting rates ten times in a row.

The central bank left its main refinancing rate at 4.5%, the marginal lending facility rate at 4.75%, and the deposit facility rate at 4.0%.

The central bank noted in the accompanying statement that the euro area economy "remains weak," and inflation is weakening but still remains far above the target rate of 2.0%.

A strong labor market has supported economic activity, and the unemployment rate stood at a historical low of 6.4% in August.

"At the same time, there are signs that the labor market is weakening. Fewer new jobs are being created, including in services, consistent with the cooling economy gradually feeding through to employment," the statement highlighted.

The central bank also noted that it will take time for inflation to come down to its target level because core inflation, which excludes food and energy prices, still remains far above the target level.

In Friday's trading, investors focused on corporate earnings and economic updates in the region and overlooked the decline in market indexes in New York.

Spain's GDP expanded by 0.3% in the third quarter, following the revised 0.4% growth in the second quarter, the National Statistics Institute said on Friday.

The economy expanded by 1.8% from a year ago in the third quarter, after expanding by 2.0% in the second quarter.

 

Europe Indexes and Yields

The DAX index increased 0.2% to 14,764.62, the CAC-40 index fell 0.6% to 6,845.73, and the FTSE 100 index edged higher by 0.06% to 7,378.05.

The yield on 10-yetrar German bonds decreased to 2.84%, French bonds traded higher to 3.45%, the UK gilts edged up to 4.56%, and Italian bonds inched higher to 4.80%.

The euro hovered near a three-month low at $1.056, the British pound at $1.213, and the U.S. dollar at 90.71 Swiss cents.

Brent crude increased $0.78 to $88.70 a barrel, and the Dutch TTF natural gas edged higher by €0.34 to €50.47 per MWh.

 

Europe Stock Movers

SKF AB Class B increased 0.8% to 178.70 Swedish kronor after the largest industrial bearing company said it plans to exit from its non-core operations.

Covestro AG decreased 2% to €47.69 after the company confirmed it was in merger talks with Abu Dhabi National Oil Company, or ADNOC.

Sanofi SA plunged 16.9% to €83.42 after the French pharmaceutical company said it plans to split its consumer healthcare business in the fourth quarter of 2024 through a stock exchange listing in Paris.

The French pharmaceutical company reiterated its full-2023 earnings per share to grow in the "mid single-digits" at a constant currency exchange rate.

Revenue in the third quarter declined 4% to €11.95 billion, but net income soared 21.6% to €2.5 billion, or €2.01 per share.

Eni SpA rose 0.7% to €15.57, despite the Italian energy company reporting a 67% drop in third-quarter profit.

Signify NV, formerly known as Philips Lighting NV, jumped 5.7% to €24.02 after the Dutch company reported strong core earnings.

International Consolidated Airlines Group SA, or IAG, declined 0.3% to €1.64 despite the parent companies of British Air and Iberian Air reporting better-than-expected quarterly results.

NatWest Group Plc plunged 11.9% to 181.25 pence after the UK's Financial Conduct Authority said in a report that the bank may have committed potential "regulatory breaches" related to a baking account scandal that led to the ouster of its chief executive, Alison Rose.

Remy Cointreau SA plunged 8.9% to €107.40 after the French spirit and wine company lowered its sales outlook and trimmed its profit estimate.

MTU Aero Engines AG declined 2.2% to €175.75 after the German aerospace and defense company reported a rise in adjusted sales and earnings and reiterated its annual outlook.