European Markets On Hold Amid Global Rate Path and Economic Growth Uncertainties

Bridgette Randall
05 Sep, 2024
London

European markets lacked direction, and investors debated economic growth outlook and future interest rate path. 

Benchmark indexes in Paris, London, and Frankfurt traded sideways, and investors reviewed the latest updates on German factory orders and retail sales in the Euro Area.

Jittery investors have been selling stocks amid growing anxieties about the economic growth outlook in the U.S., China, and the Euro Area. 

Investors are on edge after a private manufacturing survey showed weakening activities for the fifth month in a row, and job openings also dropped to the level last seen in 2021. 

In the eurozone, consumer price inflation fell closer to the 2% target level set by the central bank largely because of the decline in energy prices, and consumer spending remains depressed amid high cost of living and weak wage growth. 

Moreover, consumer demand remains weak in China, once the key driver of demand for luxury goods from Europe, amid a protracted slump in the property market and growing uncertainty in the labor market. 

 

Large Transportation Orders Lift Germany's Factory Orders In July 

Closer to home, Germany's factory orders rose 2.9% in July, following an upwardly revised 4.6% increase in June, the Federal Statistical Office, or Destatis, reported Thursday. 

Orders unexpectedly rose for the second consecutive month, driven by an 86.5% jump in orders for transportation equipment and an 18.6% rise in electrical equipment. 

While domestic orders were unchanged in the month, orders from other countries increased 5.1%, driven by a 5.9% rise in orders from the eurozone and a 4.6% advance from outside the currency union. 

Incoming orders on an annual basis rose 3.7%, and excluding large orders, they fell 0.4% from June. 

 

Lack of Retail Sales Growth Highlights Stretched Consumer 

Retail sales in the Euro Area in July increased 0.1% from the previous month when sales were revised to a decline of 0.4%, Eurostat reported Thursday. 

The fuel sales declined 1% and outweighed the increase of 0.4% in food, beverage, and tobacco product sales and the 0.1% rise in non-food product sales. 

Euro Area retail sales in July declined 0.1% from a year ago as consumers limited purchases to basic items amid a cost of living crisis and high interest rates. 

 

Europe Indexes and Yields

The DAX index increased by 0.1% to 18,608.88; the CAC-40 index fell by 0.6% to 7,454.52; and the FTSE 100 index declined by 0.1% to 8,256.73. 

The yield on 10-year German bonds edged lower to 2.22%, French bonds inched down to 2.95%, the UK gilts edged down to 3.94%, and Italian bonds decreased to 3.59%.

The euro edged down to $1.10; the British pound inched higher to $1.31; and the U.S. dollar strengthened to 84.62 Swiss cents.

Brent crude increased $0.47 to $73.19 a barrel, and the Dutch TTF natural gas rose by €0.74 to €36.36 per MWh. 

 

Europe Stock Movers

Volvo AB Class B increased by 0.2% to SEK 261.70 despite the automaker lowering its sales and profit estimates. 

Associated British Foods decreased 5% to 2,365.18 pence after the parent company of Primark said wet weather negatively impacted its second-half retail sales. 

Vistry Group PLC jumped 5.6% to 1,392.76 pence after the UK-based home builder said it plans to buyback £130 million worth of its own stock. 

Churchill China declined 9.2% to 981.0 pence after the UK-based pottery company reported a sharp decline in revenue in its first half, driven by weakness in sales in the UK and Europe. 

Revenue plunged 7.8% to £40.6 million, net income increased 3.1% to £3.5 million, and earnings per share rose 2.8% to 32.8 pence from 31.9 pence a year earlier. 

The company announced to increase its interim dividend by 4.5% to 11.5 pence from 11.0 pence a year ago. 

Ashmore Group gained 6.8% to 184.70 pence, and the emerging markets-focused fund manager reported slightly better-than-expected annual results.