European Markets Extended a Two-Week Rally, Eurozone Inflation Dropped to a 2-year Low

Bridgette Randall
17 Nov, 2023
Frankfurt

 European market indexes advanced after eurozone inflation was confirmed at a two-year low and retail sales in the UK declined for the fourth month in a row.

Benchmark indexes in Frankfurt, Paris, and London gained on the hopes that the decelerating inflation will encourage policymakers to keep interest rates steady.

Positive news on the inflation front was contrasted by worries about consumer spending in the UK after retail sales fell for the fourth month in a row.

The decline in retail sales was largely driven by the fall in energy prices, but consumers focused on essential items and avoided discretionary goods.

 

Eurozone Inflation Confirmed at a Two-Year Low

Euro Area inflation was confirmed at 2.9% in October, Eurostat reported Friday.

Consumer price inflation was the lowest since July 2021, reflecting a decline in energy prices and a slowdown in food price inflation.

Core inflation, which excludes food and energy prices, dropped to 4.2% in October from 4.5% in September.

The sharp decline in energy prices by 11.2% compared to the 7.6% fall in September and the deceleration in food price inflation to 7.4% from 8.8% contributed to the decline in overall inflation.

However, service inflation changed little, supporting the elevated core inflation.

Service inflation eased to 4.6% from 4.7% in September.

 

UK Retail Sales Dropped Fourth Consecutive Month 

UK retail sales declined 0.3% in October, following a 1.1% decrease in September, the Office for National Statistics reported Friday.

Retail trade sales fell for the second consecutive month after consumers avoided discretionary items, and the 2% fall in fuel sales led to a decline in other categories.

Sales at food stores fell 0.3%, and sales at nonfood stores eased 0.2%.

 

Europe Indexes and Yields

The DAX index increased 1.0% to 15,950.76, the CAC-40 index rose 0.1% to 7,244.87, and the FTSE 100 index gained 0.8% to 7,474.0.

In the week, the DAX index increased 4.2%, the CAC-40 index advanced 2.2%, and the FTSE 100 index inched higher 1%. 

The yield on 10-year German bonds decreased to 2.52%; French bonds traded lower to 3.08%; the UK gilts eased to 4.05%; and Italian bonds inched lower to 4.27%.

The euro rebounded to $1.085, the British pound at $1.239, and the U.S. dollar at 88.75 Swiss cents.

Brent crude increased $0.43 to $77.87 a barrel, and the Dutch TTF natural gas edged higher by €0.26 to €46.09 per MWh.

 

Europe Stock Movers

Luxury stocks in Paris traded higher after tensions eased between China and the U.S. following the meeting between U.S. President Joe Biden and China's President Xi Jinping.

Kering SA increased 1.6% to €405.50, LVMH advanced €711.20, and Richemont SA gained 2.8% to CHF 113.10.

Hill& Smith PLC increased 3% to 1,888.0 pence after the UK-based engineering and construction company agreed to acquire the assets and business of United Fiberglass for $14 million.

FirstGroup plc increased 180.90 pence after the UK-based transportation company announced a partnership with Hitachi ZeroCarbon Limited related to the company's decarbonization program.

London Stock Exchange Group plc added 0.9% to 8,486.0 pence after the trading platform operator and financial data provider reiterated their 2023 outlook.

Volvo Car AB dropped 9.6% to 36.72 krona after the largest shareholder in the company, China-based Geely Automobile, announced the sale of 100 million shares at a deep discount.