Eurozone Inflation Expectations Moderate, UK Home Price Gain Accelerates In March

Bridgette Randall
02 Apr, 2024
Frankfurt

European market indexes struggled to advance, bond yields edged higher, and the euro held steady in Tuesday's trading. 

Market sentiment was cautiously optimistic as investors reviewed mixed updates on factory activities in the eurozone, the U.K., Spain, Italy, and Holland. 

Benchmark indexes in Paris, Frankfurt, and London hovered near recent record highs as investors debated future interest rate paths amid a weak macroeconomic backdrop and a moderating but elevated inflation level. 

Crude oil prices advanced to a five-month high, stoking fears that higher energy prices may fuel another bout of inflation, supporting the case for higher-for-longer interest rates. 

 

UK Home Price Annual Change Accelerate In March 

The UK home price unexpectedly declined in March from the previous month, according to the latest update released by the Nationwide Building Society. 

The Nationwide Building Society's house price index decreased 0.2% from the previous month in March, after rising 0.7% in February.

The home price index increased 1.6% from a year ago, faster than 1.2% rise in February, and the average home price increased to £261,142 from £260,420 in the previous month. 

 

Euro Area Inflation Expectations Moderate

The consumer expectations of inflation in the Euro Area moderated in February, according to the latest survey released by the European Central Bank. 

Median expectations of inflation over the next 12 months eased to 3.1% in February from 3.3% in January, the survey showed. 

The inflation expectations dropped to the lowest since the start of the Ukraine war; however, the three-year forward inflation outlook was unchanged at 2.5%. 

However, consumers anticipated home prices to advance at a slightly faster pace of 2.4% from 2.2% in January, but mortgage rate expectations were unchanged at 5.1%. 

Unemployment rate expectations over the next 12 months stayed the same at 10.9%, and economic growth over the same period was unchanged at -1.1%. 

Consumers were slightly more optimistic about nominal income growth expectations, with an increase of 1.4% compared to the previous expectation of 1.2% in January, but nominal spending growth expectations were stable at 3.7%. 

 

Europe Indexes and Yields

The DAX index decreased by 0.1% to 18,480.81, the CAC-40 index rose by 0.2% to 8,218.86, and the FTSE 100 index inched higher by 0.3% to 7,973.30.

The yield on 10-year German bonds edged up to 2.39%; French bonds inched higher to 2.89%; the UK gilts edged higher to 4.09%; and Italian bonds inched lower to 3.76%.

The euro edged higher to $1.076, the British pound inched higher to $1.256, and the U.S. dollar held steady at 90.84 Swiss cents.

Brent crude increased $1.21 to $88.92. a barrel, and the Dutch TTF natural gas fell by €0.35 to €26.98 per MWh.

 

Europe Stock Movers

Rheinmetall AG jumped 2.2% to €533.40 after the German automotive products and arms maker won an order worth 135 million from the military contractor KNDS Group. 

UBS Group advanced 0.5% to CHF 27.89 after the Swiss bank launched a new stock repurchase program of up to $2 billion. 

Metals and mining companies advanced after manufacturing activities expanded at a faster pace in the U.S. and China. 

Antofagasta, Anglo America, and Glencore gained between 1% and 2.5%. 

BP plc and Shell PLC jumped 2.9% after Brent crude oil prices approached a five-month high of $89 a barrel on the expectation of rising demand in China and falling inventories in the U.S. 

Persimmon declined 1.9% to 1,290.50 pence, and Taylor Wimpey decreased 1,290.50 pence after the home price index unexpectedly fell in March after higher mortgage rates dented demand. 

CTS Eventim increased 0.5% to €82.95 after the German festival ticketing company signed a put option agreement to acquire Vivendi's festival and ticketing operation outside of France for an undisclosed amount. 

See Tickets, owned by Vivendi, sold about 44 million tickets in 2023 for trade shows, sports events, concerts, and other consumer and business events in the U.S., Belgium,   

Vivendi's ticketing business generated about €105 million of the total of €137 million through its broader festival operations, with U.S. and UK revenues accounting for the majority of the share.