European Stocks Extend Rally, Euro Jumped to 2-month High, France and UK Inflation Eased

Bridgette Randall
15 Nov, 2023
Frankfurt

European stocks extended weekly gains, and bond yields in the region continued to drift lower.

Benchmark indexes in Frankfurt, Paris, and London advanced following the softer inflation report in the U.S.

The weakening of inflation in October to 3.2% from 3.7% in September supported the case for the U.S. Federal Reserve to hold rates steady at the next meeting and remove rate path uncertainties for the next two months.

Closer to home, investors reviewed the Eurozone GDP growth outlook, consumer inflation in France and the UK, and wholesale inflation in Germany.

 

Euro Area GDP Growth Estimate Lowered

The economic growth in the Euro Area was lowered to 0.6% from the previous estimate of 0.8%, according to the European Commission's Autumn 2023 Economic Forecast.

High inflation and interest rates and weak external demand in the currency union are negatively impacting consumers and businesses.

Among the larger economies in the region, Germany is expected to shrink by 0.3%, but France will grow by 1%, Spain by 2.4%, and Italy by 0.7%.

The commission also held its 2023 inflation estimate at 5.6%, but the slightly higher 2024 estimate was revised to 3.2% from the previous estimate of 2.9%.

 

UK consumer Price Inflation Dropped to 2-year Low 

Consumer price inflation in the UK dropped to a two-year low in October, according to the Office for National Statistics.

The annual inflation rate in the UK dropped to 4.6% in October from 6.7% in September, reflecting the sharp decline in energy and utility costs.

Inflation fell at the fastest pace in a month since 1992 after food price inflation eased to 10.1% from 12.2% in September and a 23% fall in energy price cap to £1,923 from £2,500 a year ago.

Despite the decline in inflation, prices are still rising at a faster pace than the 2% target set by the Bank of England.

 

French Inflation Eased in October 

In France, consumer price inflation declined to 4% in October from 4.9% in September, the statistical agency INSEE reported on Wednesday.

Weaker energy prices and rising interest rates played a key role in weakening inflation.

Energy price inflation slowed to 5.2% from 11.9%, reflecting a decline in gas prices and fuel prices.

Food price inflation eased to 7.8% from 9.7% in September, and inflation slowed for the seventh consecutive month.

However, the core rate of inflation, which excludes volatile food and energy prices, declined to a 16-month low of 4.2% from 4.6%.

 

Europe Indexes and Yields

The DAX index increased 0.4% to 15,681.48, the CAC-40 index advanced 0.5% to 7,220.87, and the FTSE 100 index rose 0.9% to 7,507.89.

The yield on 10-year German bonds declined to 2.59%; French bonds traded lower to 3.16%; the UK gilts eased to 4.17%; and Italian bonds inched lower to 4.40%.

The euro rebounded to $1.086, the British pound at $1.246, and the U.S. dollar at 88.79 Swiss cents.

Brent crude decreased $0.36 to $82.10 a barrel, and the Dutch TTF natural gas edged higher by €0.29 to €47.90 per MWh.

 

Europe Stock Movers

Alstom SA plunged 20.4% to €11.29 after the company struggled with rising inventories and challenges integrating recent acquisitions.

The French train maker is expected to cut as many as 1,500 jobs, lower its debt by €2 billion, and sell some of its key assets.

Chief executive Henri Poupart-Lafarge said that the company may consider raising capital through an equity offering after exhausting other alternatives.

Infineon Technologies AG increased 6.7% to €32.67 after the company reported better-than-expected quarterly results in the fiscal fourth quarter and also held out for higher sales in the current quarter.

Siemens Energy AG advanced 4.6% to €10.72 after the company secured €7.5 billion in project-related guarantees from the German government.

Tullow Oil plc gained 7.3% to 35.96 pence after the company lifted its 2023 cash flow outlook.

Experian plc increased 6.8% to 2,865.0 pence after the credit card data company reported an increase in first-half profit.

Alcon AG declined 6.5% to CHF 63.94 after the Swiss eye-care company reported weaker-than-expected third-quarter sales.