Eurozone Retail Sales Extended Declining Trend, UK Home Price Growth Slowed

Bridgette Randall
05 Apr, 2024
Frankfurt

European markets dropped sharply on the final day of a holiday-shortened trading week. 

Benchmark indexes in Frankfurt, Paris, and London declined more than 1% after investors lowered expectations of rate cuts in the U.S. following hawkish comments from Federal Reserve officials. 

Closer to home, Euro Area retail sales declined in February and extended the downturn to the 17th month in a row due to the persistently high cost of living and elevated interest rates. 

 

UK Monthly Home Prices Declined In February 

The Halifax House Price Index in the UK rose 0.3% from a year ago in February, Halifax and the Bank of Scotland reported Friday. 

The home price index increased for the fourth month in a row; however, the pace of an annual increase eased to the slowest pace in the month. 

Despite the market volatility, underlying demand for homes remains strong amid elevated rental costs across the nation. 

Home prices declined 1% on a monthly basis, and an average UK home now costs £288,430, around £2,900 less than last month. 

“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates," Kim Kinnaird, Director, Halifax Mortgages, said. 

The UK's housing market is still in a state of flux, as most existing home owners have yet to feel the full brunt of higher interest rates. 

 

Eurozone Retail Sales Extend Annual Decline Streak to 17th Month

Eurozone retail sales declined in February, highlighting a challenging environment for consumers amid elevated interest rates and high inflation. 

Retail sales in the currency union decreased 0.5% from the previous month in February after staying unchanged in January, Eurostat reported Friday. 

Sales of food, drinks, and tobacco fell by 0.4% after a 0.3% rise the previous month, while non-food product sales decreased by 0.2% after a 0.4% increase. 

Meanwhile, sales of automotive fuel shrank by 1.4%, the largest decline in seven months.

Retail sales on an annual basis declined 0.7% in February, extending the decline to the 17th month in a row after consumers retrenched on basic necessities and avoided discretionary items. 

 

German factory Orders Rebound Slightly from Previous Month in February

Germany's factory orders increased monthly by 0.2% in February, following the revised 11.4% fall in January, Destatis reported Friday. 

Calendar-adjusted orders from a year ago dropped 10.6%. 

In a less volatile three-month comparison, incoming orders from December 2023 to February 2024 were 2.8% higher than in the previous three months. 

However, the increase is mainly due to a large order in December. 

Excluding large orders, incoming orders from December 2023 to February 2024 were 2.0% lower than in the previous three months. 

Orders rose for manufacturing electrical equipment by 10.7% after falling for two months in a row, pharmaceuticals by 6.6%, and the chemical industry by 3.1%. 

In contrast, new orders declined for automotive by 8.1% and for manufacturing metal products by 5.3%.

Incoming orders for capital goods declined by 0.6% and rose for both intermediate goods by 1.0% and consumer goods by 2.2% in February compared to the previous month.

Domestic orders increased 1.5%, but foreign orders eased 0.7%, with demand from the eurozone falling 13.1% and orders from outside the currency union advanced 7.8%.

 

Europe Indexes and Yields

The DAX index decreased by 1.5% to 18,130.88, the CAC-40 index fell by 1.4% to 8,034.74, and the FTSE 100 index inched lower by 1.0% to 7,894.95.

The yield on 10-year German bonds edged down to 2.36%; French bonds inched lower to 2.87%; the UK gilts edged lower to 4.08%; and Italian bonds inched higher to 3.73%.

The euro edged higher to $1.083, the British pound inched higher to $1.263, and the U.S. dollar edged higher to 90.30 Swiss cents.

Brent crude increased $0.25 to $90.90. a barrel, and the Dutch TTF natural gas rose by €0.26 to €26.37 per MWh.

 

Europe Stock Movers

Travel and leisure stocks declined after crude oil prices jumped to near $91 a barrel on the rising tensions in the Middle East following the escalation of tensions between Iran and Israel. 

TUI AG declined 2.3% to €7.56, easyJet declined 2.5% to 554.80 pence, and the parent company of British Air, International Consolidated Airlines Group, fell 2.8% to 171.55 pence. 

UK home builders declined after home prices rose at the slowest pace in four months. 

Barratt Developments, Taylor Wimpey, and Persimmon declined between 12% and 1.7%.