Cautious Optimism Prevailed In European Markets Ahead of ECB Rate Decisions

Bridgette Randall
11 Sep, 2024
London

European markets were mixed ahead of the closely watched monetary policy decision on Thursday. 

Benchmark indexes in Paris, London, and Frankfurt edged higher as investors anticipated a rate cut by the European Central Bank tomorrow. 

The ECB has been signaling that policymakers are likely to lower rates following the weakening in inflation over the last eighteen months. 

Investors are also keenly awaiting the release of economic projections for the rest of the year and next year, amid weak consumer demand and a high cost of living. 

On the economic front, the UK's GDP stagnated for the second month in a row in July, after the growth in service output was overshadowed by the weakness in manufacturing and construction.

Production output weakened by 0.8% in July, following a growth of 0.8% in June, and decreased by 0.1% in the three months to July 2024.

Construction output decreased by 0.4% in July, following a growth of 0.5% in June, but expanded by 1.2% in the three months to July, its first positive three-month growth since September 2023.

Over the three months to July, the real economy expanded by 0.5% from the previous three-month period with a strong contribution from service output, the Office for National Statistics reported Wednesday. 

GDP growth in the three-month period slowed from a 0.6% increase in the previous period ending in July. 

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 18,340.93; the CAC-40 index rose by 0.3% to 7,429.59; and the FTSE 100 index rose by 0.1% to 8,211.59. 

The yield on 10-year German bonds edged lower to 2.13%, French bonds inched lower to 2.83%, the UK gilts edged down to 3.78%, and Italian bonds increased to 3.49%.

The euro edged down to $1.10; the British pound inched higher to $1.30; and the U.S. dollar weakened to 84.62 Swiss cents.

Brent crude increased $1.44 to $70.62 a barrel, and the Dutch TTF natural gas rose by €0.03 to €35.53 per MWh. 

 

Europe Stock Movers

Commerzbank soared 16.8% to €14.73, and the German government agreed to sell its 4.5% stake in the bank to Italian lender UniCredit. 

UniCredit said it plans to seek permission to acquire an additional stake in the German bank, according to sources in the German finance ministry. 

The Italian lender acquired the entire stake priced at €13.20 per share for €702 million, making UniCredit the largest shareholder in the German bank. 

Santander Bank Polska declined 7.9% to 463.0 zloty after parent company Banco Santander sold a 5.2% stake in the Polish bank. 

Rightmove Plc increased 0.3% to 673.0 pence after the UK-based property platform rejected an acquisition offer from the Australia-based REA Group. 

Ricardo plc declined 1.5% to 508.0 pence despite the renewable energy-focused company announcing improved financial results in fiscal year 2024. 

Rentokil Initial plc plunged 18.5% to 385.90 pence after the pest control company issued a profit warning. 

Inditex increased 4.4% to €48.30 after the Spanish apparel company reported strong first-half results. 

Sales in the first-half increased to 7.2% to €18.1 billion and net income advanced 10.1% to €2.8 billion. 

The increase in sales were driven by the success of its Spring/Summer collections. 

Total sales, including store sales and online sales, between August 1 and September 8 rose 11% from a year ago, suggesting positive impact on its results in the third quarter.