European Markets Hover Near Record Highs After Weakening Inflation Raised Rate-cut Prospects

Bridgette Randall
30 Aug, 2024
London

European markets edged higher in Friday's trading as investors reviewed the slew of regional economic updates. 

Benchmark indexes in Frankfurt, Paris, and London advanced and extended weekly gains after investors reviewed the latest updates on inflation, GDP growth, and labor markets. 

The eurozone inflation slowed to 2.2% in August from 2.6% in July, according to the preliminary estimate released by Eurostat. 

The decline in inflation was driven by the sustained cooling of volatile energy prices from a year ago, but inflation in the broader economy remained well entrenched and above the central bank's target rate of 2%. 

The core rate of inflation, which excludes energy and unprocessed food, remained unchanged at 2.8%, indicating a difficult road ahead for policymakers. 

On the labor market front, the unemployment rate in the eurozone eased by 0.2 percentage points to 6.4%, a separate report by Eurostat showed on Friday. 

In addition, Germany's jobless rate stayed at a three-year high of 6.0% in August, and the unemployed increased by 2,000 from the previous month to 2.80 million after adjusting for seasonal factors. 

On an unadjusted basis, the jobless count increased by 63,000 to 2.87 million, a three-and-a-half-year high amid tightening labor demand. 

France's inflation cooled to 1.9% in August from 2.3% in the previous month, according to the latest data released by the INSEE. 

France's statistical agency, INSEE, also said in a separate report that GDP in the second quarter rose at a slower pace of 0.2%. 

 

Europe Indexes and Yields

The DAX index increased by 0.2% to 18,947.56; the CAC-40 index rose by 0.5% to 7,678.25; and the FTSE 100 index rose by 0.3% to 8,406.11. 

For the week, the DAX index advanced 2%, the CAC-40 index declined 1.1%, and the FTSE 100 index gained 1.5%. 

The yield on 10-year German bonds edged higher to 2.25%, French bonds inched down to 2.97%, the UK gilts edged up to 3.97%, and Italian bonds increased to 3.64%.

The euro edged down to $1.10; the British pound inched higher to $1.31; and the U.S. dollar weakened to 84.89 Swiss cents.

Brent crude decreased $0.11 to $78.94 a barrel, and the Dutch TTF natural gas rose by €0.65 to €39.93 per MWh. 

 

Europe Stock Movers

ThyssenKrupp AG decreased 0.3% to €3.22, and the chairman and CEO of the steel division and five board members resigned after disagreeing with the parent company about the future direction of the business. 

Ambu plunged 14.5% to DKK 131.30, and the Danish medical device company reported disappointing results in its fiscal third quarter. 

Revenue increased 15.7% to DKK 1.38 billion, and operating earnings before special items rose to DKK 178 million from DKK 91 million. 

Endoscopy solutions' organic revenue growth slowed to 18%, driven by a 9.9% increase in the pulmonology division, and anesthesia and patient monitoring organic revenue increased by 10.9%. 

Banks advanced in the region after lower inflation stoked speculation of a lower interest rate in the eurozone. 

Societe Generale increased 1.2% to €21.93, BNP Paribas rose 0.8% to €62.61, Intesa Sanpaolo added 1.3% to €3.78, UniCredit edged higher 0.8% to €37.18, and Deutsche Bank gained 0.5% to €14.75.