European Market Indexes Hover Near Recent Highs, German Industrial Output Extends Weakness

Bridgette Randall
07 Dec, 2023
Frankfurt

European markets took a breather after surging in the previous two sessions, and bond yields headed lower.

The DAX index edged down after closing at a record high in the previous session, and the CAC-40 index and the FTSE 100 index declined.

Bond yields dropped to the level last seen in early May as traders supported the view that the European Central Bank is likely to lead other major banks in cutting interest rates in 2024 as early as the first quarter.

German Industrial Output Fell Fifth Consecutive Month

Investors were on the backfoot after Germany's industrial output unexpectedly declined 3.5% from a year ago and 0.4% from the previous month in October.

Industrial output fell for the fifth month in a row, both on an annual and monthly basis, indicating growing economic uncertainties and the negative impact of higher interest rates.

The increase in automobile production failed to offset the weakness in mechanical engineering, the Federal Statistics Office, or Destatis, reported Thursday.

 

Italy's Industrial Production Remains Under Pressure 

Italy's industrial production decreased 0.2% from the previous month and fell 1.1% from the previous year in October, the National Institute of Statistics of ISTAT reported Thursday. 

With the lagged effect of the multiple interest rate hikes, industrial activities remained under pressure for the fourth month in a row. 

The increase in consumer goods and energy goods production was offset by the decline in capital goods and intermediate goods output.  

 

UK House Price Decline Slowed In November.

The Halifax House Price Index decreased 1.0% from a year ago in November, following a revised 3.1% decline in October, Halifax and the Bank of Scotland reported Thursday.

Home prices rose 0.5% from the previous month, marking the second monthly price increase following the shortage of available homes.

Home prices are expected to decline in the months ahead because of economic uncertainties, elevated interest rates, a lack of affordability, and a higher cost of living.

Home prices in London were not immune from price declines and fell 3.8% from a year ago, after buyers stayed away because of a lack of affordability.

Home prices declined 5.7% in the South East and fell 1.5% in Wales, but prices in Northern Ireland rose 2.3% and were unchanged in Scotland.

 

Europe Indexes and Yields

The DAX index decreased 0.3% to 16,613.29, the CAC-40 index fell 0.2% to 7,421.02, and the FTSE 100 index fell 0.3% to 7,496.21.

The yield on 10-year German bonds decreased to 2.20%; French bonds traded lower to 2.74%; the UK gilts declined to 3.98%; and Italian bonds inched lower to 3.95%.

The euro traded lower to $1.077, the British pound inched lower to $1.257, and the U.S. dollar eased to 87.42 Swiss cents.

Brent crude increased $0.66 to $74.93 a barrel, and the Dutch TTF natural gas increased by €1.39 to €40.71 per MWh.

 

Europe Stock Movers

Games Workshop Group dropped 8% to 9,750.0 pence after the company reported weaker-than-expected interim results.

Airlines in Europe were under pressure after JP Morgan lowered its view on the sector, citing rising capacity. The investment bank said discount carriers are likely to do better than large-network airlines in 2024, citing profitability worries for the international carriers.

Lufthansa declined 4.5% to €8.20 after JP Morgan lowered its view on the German airline to "underweight" from "overweight" and lowered its target price to €7.0.

Air France KLM dropped 5.7% to €11.94 after JP Morgan lowered its view on the international carrier to "underweight" from "overweight."

International Consolidated Airlines Group, parent of British Airways and Iberian Air, fell 3.5% to 156.15 pence after JP Morgan lowered its view to "neutral" from "underweight."

Sanofi SA advanced 0.3% to €87.05 after the French drug maker said it has a dozen drug candidates in the development stage with an annual sales potential of more than €1 billion.