European Markets Trimmed Weekly Gains, UK Economy Stalled In Third Quarter

Bridgette Randall
10 Nov, 2023
Frankfurt

European markets fell after rate hike worries resurfaced following hawkish comments from central bankers.

Benchmark indexes in Frankfurt, Paris, and London declined between 0.5% and 1.2%, and bond yields rebounded following comments from Federal Reserve Chairman Jerome Powell.

Powell commented during an IMF panel discussion in Washington, DC, that it is too early to conclude that interest rate hikes are not needed to bring down inflation to the target rate of 2%.

His comments sparked a selloff in U.S. Treasury notes in late Thursday's trading, and European bond yields rebounded in Friday's trading.

 

UK GDP Stagnates in the Third Quarter

In other economic news, the UK's GDP in the third quarter stagnated from the previous quarter, the Office for National Statistics reported Friday.

A year ago, GDP expanded by 0.6%.

The GDP estimate matched the Bank of England's forecast released earlier in the month.

The economy expanded at the slowest pace in four months, and the service output declined by 0.1%, but the production output was nearly flat.

High interest rates and elevated prices kept consumer spending in check and negatively impacted business investments.

On the expenditure side, an increase in the volume of net trade was offset by a 4.2% decline in business investment, a 0.4% fall in household spending, and a 0.5% decrease in government consumption.

 

Europe Indexes and Yields

The DAX index decreased 0.7% to 15,251.96, the CAC-40 index fell 0.9% to 7,049.25, and the FTSE 100 index fell 1.2% to 7,365.17.

The yield on 10-year German bonds increased to 2.73%, French bonds traded higher to 3.31%, the UK gilts edged up to 4.34%, and Italian bonds inched lower to 4.59%.

The euro rebounded to $1.067, the British pound at $1.22, and the U.S. dollar at 90.18 Swiss cents.

Brent crude increased $0.88 to $80.89 a barrel, and the Dutch TTF natural gas edged lower by €2.04 to €46.09 per MWh.

 

Europe Stock Movers

Resource and mining stocks turned lower after prices of copper, iron ore, gold, and silver declined between 0.2% and 1.0%.

Antofagasta plc fell 2.8% to 1,288.0 pence, Anglo American plc decreased 3.5% to 1,288.0 pence, and Glencore PLC declined 1% to 425.65 pence.

Richemont SA declined 6.3% to CHF 105.40 after the Swiss luxury company reported weaker-than-expected third-quarter results.

Diageo plc plunged 16.2% to 2,720.0 pence after the alcoholic beverage maker said operating profit growth will slow in the first half of the fiscal year.

The company said sales in Latin America and the Caribbean, which account for 11% of total sales, are facing macroeconomic headwinds and customers are preferring cheaper alternatives.

Diego stock plunged after the company made a surprise announcement, reversing the earlier forecast of "gradual improvement" in sales growth.

The company still estimates sales growth improvement in North America, but sales in Europe and Asia Pacific continued to grow at a slower pace than in the previous half.

Redrow plc dropped 5.2% to 492.80 pence after the UK-based homebuilder said revenue and profit would be near the lower end of the previously announced range.

Allianz SE rose 2.2% to €227.40 after the German insurance company confirmed its 2023 operating profit target.

SCOR SE declined 5.5% to €26.46 after the tier 1 reinsurance company said quarterly gross premium declined to €4.87 billion from €5.14 billion a year ago.