European Markets Brave Higher Despite Weak Economic Data

Bridgette Randall
27 Aug, 2024
London

In cautious trading across Europe, stocks struggled to advance as investors reviewed the latest batch of economic updates on Tuesday. 

Benchmark indexes in Frankfurt and Paris edged up 0.5%; in London, they advanced 0.3% after Germany's GDP in the second quarter shrank as expected. 

Meanwhile, the hopes of a second-half economic recovery led by consumers in Germany got another hit after consumer morale weakened significantly. 

The seasonally adjusted GDP in the second quarter contracted by 0.1% from the previous quarter and advanced by 0.3% from a year ago, the Federal Statistics Office, or Destatis, reported Tuesday. 

As initially estimated, weak household spending and investment negatively impacted activities in the second quarter, following a 0.2% rise in the first quarter. 

Overall consumer spending was stable compared to the previous quarter, increasing slightly by 0.1% after adjusting for price, seasonal, and calendar effects. 

Private consumption decreased by 0.2% after increasing at the beginning of the year; however, government spending rose significantly by 1.0%.

German consumer morale is expected to weaken in September as fears of mounting job losses, rising insolvencies, and weakening economic activities weigh. 

The forward-looking consumer sentiment index dropped to -22.0 from -18.6 in August, according to a joint survey published by GfK and Nuremberg Institute for Market Decisions on Tuesday. 

UK shop prices eased for the first time in nearly three years in August, according to data released by the British Retail Consortium on Tuesday. 

The shop price index dropped 0.3% in August, reversing the 0.2% increase in July, after retailers enlarged discounts to clear summer stocks and pushed down overall non-food prices. 

 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,595.71; the CAC-40 index rose by 0.5% to 7,560.72; and the FTSE 100 index advanced by 0.3% to 8,312.02. 

The yield on 10-year German bonds edged higher to 2.28%, French bonds inched up to 3.01%, the UK gilts edged higher to 3.98%, and Italian bonds increased to 3.67%.

The euro edged down to $1.12; the British pound inched higher to $1.32; and the U.S. dollar weakened to 84.65 Swiss cents.

Brent crude decreased $0.40 to $81.02 a barrel, and the Dutch TTF natural gas fell by €0.67 to €36.42 per MWh.

 

Europe Stock Movers

Flughafen Zurich AG decreased after the Swiss airport operator reported weaker-than-expected first-half results. 

Sandvik AB decreased 0.2% to DKK 214.0, and the Swedish engineering company agreed to acquire Universal Field Robots. 

Mining companies advanced in London after copper futures prices advanced to a six-week high in the hopes of a rate cut by the U.S. Federal Reserve next week. 

Antofagasta increased 1.3% to 1,901.50 pence, Anglo American increased 2.3% to 2,302.50 pence, and Glencore added 0.4% to 412.80 pence. 

Rheinmetall AG decreased 0.4% to €532.80, and the arms and automotive company said it won an order to build exhaust gas recirculation valves for a "renowned car manufacturer."

Bunzl plc jumped 7% to 3,440.0 pence and traded at a new record high after the diversified distribution and outsourcing group reported better-than-expected first-half results and announced a stock buyback plan. 

Revenue in the first half decreased 3.3% to £5.7 billion from £5.9 billion; pre-tax profit dropped 11.9% to £279.4 million from £317.1 million; and earnings per share fell 16.4% to 59.2 pence from 70.8 pence a year ago.

The company also launched a £250 million stock repurchase plan to be completed before March 3, 2025. 

The diversified conglomerate increased its interim dividend by 10.4% to 21.1 pence from 18.2 pence a year earlier.