Election Uncertainties Weigh On European Trading Sentiment

Bridgette Randall
02 Jul, 2024
Frankfurt

European markets traded down amid election uncertainty, a weak economic outlook, and ongoing tensions with Russia. 

Benchmark indexes in Paris and London fell ahead of parliamentary elections in the UK on July 4 and the second round of elections in France on July 7. 

Market sentiment was weak, and bond yields advanced in the currency union as investors feared that lawmakers in the soon-to-be-appointed new parliaments in France and the UK may struggle to cut spending and lower national debt. 

 

Eurozone Inflation Eased in June 

Consumer price inflation in the eurozone eased to 2.5% in June after edging higher to 2.6% in May, Eurostat, the statistical agency of the European Union, reported Tuesday. 

Prices for food, tobacco, and alcohol rose at a slower pace of 2.5% compared to 2.6% in the previous month and energy at 0.2% from 0.3%.

Meanwhile, inflation was steady for non-energy industrial goods at 0.7% and for services at 4.1%. 

Core inflation, which excludes food, energy, tobacco, and alcohol, was unchanged at 2.9%. 

Among the largest economies, inflation eased in Germany to 2.5% from 2.8%, in France to 2.5% from 2.6%, and in Spain to 3.5% from 3.8%, but rose in Italy to 0.9% from 0.8%. 

 

Eurozone Unemployment Rate Remained Steady in June

The jobless rate in the eurozone held steady at the record low of 6.4% in May, matching the rate in the previous month, Eurostat reported Tuesday. 

The number of unemployed people increased by 38,000 from the previous month to 11.1 million; however, the jobless rate among those younger than 25 was 14.1%, matching the revised rate in April. 

Among the four largest economies in the currency union, Spain recorded the highest rate of 11.7%, followed by France at 7.4%, Italy at 6.8%, and Germany at 3.3%. 

The unemployment rate in the eurozone was 6.5% a year ago in the corresponding month. 

 

Europe Indexes and Yields

The DAX index decreased by 1.0% to 18,113.82; the CAC-40 index fell by 0.8% to 7,499.98; and the FTSE 100 index fell by 0.4% to 8,136.02. 

The yield on 10-year German bonds edged higher to 2.60%; French bonds inched higher to 3.31%; the UK gilts edged higher to 4.25%; and Italian bonds increased to 4.13%.

The euro edged lower to $1.07; the British pound inched lower to $1.264; and the U.S. dollar advanced to 90.38 Swiss cents.

Brent crude increased $0.68 to $87.25 a barrel, and the Dutch TTF natural gas fell by €0.09 to €33.34 per MWh.

 

Europe Stock Movers

Ryanair Holdings declined 3% to €16.15, despite the budget airline reporting record passenger counts in June. 

Sodexo declined 4.4% to €81.90 after the food service provider and facilities management company reported weaker-than-expected revenue in the fiscal third quarter. 

J. Sainsbury declined 1.5% to 253.73 pence after the grocery chain operator said that adverse weather had negatively impacted recent volume growth.

Revenue, excluding fuel, in the sixteen-week period ending on June 22 increased by 2.6%, and comparable sales rose by 3.0%. 

The company reiterated its commitment to returning £250 million to shareholders after the sale of its core banking business to NatWest. 

Additionally, the company plans to complete its £200 million stock repurchase program in the current fiscal year.