Euro Area Business Activities Unexpectedly Expanded Despite Weaknesses In Germany

Bridgette Randall
22 Aug, 2024
London

European markets inched higher on Thursday as private sector activities expanded for the sixth month in a row in August. 

Benchmark indexes in London, Paris, and Frankfurt edged higher after the strength in the service sector overshadowed the continued weakness in manufacturing. 

Private sector business activities showed surprising strength after a four-month high increase in the service sector to offset the two-year decline in manufacturing. 

The HCOB Eurozone Composite PMI increased to 51.2 in August from 50.2 in July, and private sector activities expanded for the sixth month in a row, S&P Global reported Thursday. 

The index for service activities rose to 53.3 from 51.9, and the index for manufacturing activities decreased to 45.6 from 45.8 in the previous month. 

Any reading above 50 indicates expansion, and any reading below 50 shows contraction. 

However, Germany's private sector economy remained in contraction, according to a separate report released by S&P Global. 

HCOB Flash Composite PMI decreased to 48.5 in August from 49.1 in July after manufacturing activities continued to shrink and service sector activity growth slowed. 

Negotiated wage growth slowed to 3.55% in the second quarter following the 4.74% increase in the first quarter, primarily because of the weakness in Germany, according to the data released by the European Central Bank. 

The slowdown of wage growth in the largest economy in the eurozone could prompt policymakers to lower rates in September, alleviating concerns that rising labor costs would fuel inflation. 

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 18,497.62; the CAC-40 index rose by 0.2% to 7,539.73; and the FTSE 100 index advanced by 0.2% to 8,297.19. 

The yield on 10-year German bonds edged higher to 2.23%, French bonds inched down to 2.93%, the UK gilts edged higher to 3.94%, and Italian bonds inched up to 3.59%.

The euro edged down to $1.12; the British pound inched higher to $1.31; and the U.S. dollar weakened to 85.15 Swiss cents.

Brent crude increased $0.37 to $76.42 a barrel, and the Dutch TTF natural gas rose by €0.02 to €37.23 per MWh.

 

Europe Stock Movers

Swiss Re rose 3.5% to CHF 114.75, and the reinsurance company reported an increase in earnings in the first half and confirmed its annual outlook. 

Aegon decreased 5.8% to €5.47, and the Dutch insurance company reported a drop in its key operating profits and cash flow metrics. 

CTS Eventim AG added 7.5% to €88.70 after the German ticketing company lifted its annual outlook. 

Deutsche Bank gained 3.2% to €14.45 after the German bank settled with over 80% of plaintiffs in Postbank AG litigation. 

JD Sports Fashion PLC jumped 7.6% to 139.20 pence after the UK-based athleticwear retailer reported organic second quarter sales improved because of the strength in the U.S. and Europe. 

Oil exploration companies fell after crude oil prices fell for the fifth session in a row amid China's demand growth worries. 

BP plc decreased 1% to 425.88 pence, Shell PLC dropped 0.9% to 2,693.50, and TotalEnergies fell 0.7% to €61.71.