Eurozone Manufacturing Woes Deepened and Inflation Eased In September

Bridgette Randall
01 Oct, 2024
London

European market indexes swung between gains and losses as investors reviewed the latest update on consumer price inflation. 

Benchmark indexes in Paris, London, and Frankfurt traded around the flatline after inflation in the Euro Area fell more than expected in September. 

Crude oil was in focus as Israel prepared to carry out a military invasion in Lebanon, targeting territories controlled by Hezbollah, raising the prospects of supply disruptions. 

 

Eurozone Manufacturing Woes Deepened In September 

Eurozone manufacturing woes deepened amid broad weakness and the fall in new orders, output, employment, and procurement activity, S&P Global reported Tuesday. 

The Hamburg Commercial Bank factory purchasing managers' index eased to 45.0 in September from 45.8 in August, according to the revised estimate. 

The index stood at 44.8 in the preliminary estimate, and the final estimate was the lowest in the current series in 2024 and weakest in the current 27-month downturn. 

Across the four largest economies in the currency union, the manufacturing index in Spain rose at the fastest pace to 53.0 from 50.5 in August and extended growth in activities for the eighth month in a row. 

The headline manufacturing index plunged to a 12-month low of 40.6 from 42.4 in August as the sector's slump worsened. 

"The worsening industrial slump in Germany, for example, is too big for Spain's momentum in September to make much of a difference," the Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said. 

 

Weakening Energy Prices Drag Eurozone Inflation Lower In September

Consumer price inflation in the eurozone slowed to 1.8% in September from 2.2% in August, Eurostat reported Tuesday. 

Overall inflation dropped to the lowest level since April 2021. 

The overall inflation slowed largely because of the weakening of the price of energy and related products, tracking lower crude oil prices. 

Energy price deflation accelerated to 6% from 3% in the previous month, and food, alcohol, and tobacco inflation edged up to 2.4% from 2.3%. 

Core inflation, which excludes food and energy, slowed to 2.7% from 2.8% in the previous month, and service inflation slowed to 4% from 4.1%. 

Geographically, inflation eased in Germany to 1.8% from 2.0% in the previous month; in France it eased to 1.5% from 2.2%; in Italy it declined to 0.8% from 1.2%; and in Spain it slowed to 1.7% from 2.4%, respectively. 

Overall inflation is expected to rebound in the later part of 2024, as the previous high base in energy prices ends. 

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 19,403.07; the CAC-40 index fell by 0.01% to 7,634.25; and the FTSE 100 index rose by 0.3% to 8,278.71. 

The yield on 10-year German bonds edged lower to 2.05%, French bonds inched lower to 2.80%, the UK gilts edged down to 3.95%, and Italian bonds decreased to 3.35%.

The euro edged lower to $1.10; the British pound inched higher to $1.33; and the U.S. dollar weakened to 84.66 Swiss cents.

Brent crude decreased $0.53 to $71.16 a barrel, and the Dutch TTF natural gas fell by €0.44 to €38.21 per MWh. 

 

Europe Stock Movers

Covestro AG jumped 4.2% to €58.10 after the Abu Dhabi-controlled oil company, ADNOC, said it plans to buy the German chemical firm for €14.7 billion. 

The acquisition deal requires ADNOC to purchase all outstanding shares at €62 per share. 

Crude oil prices traded volatile as investors weighed rising tensions in the Middle East against demand growth worries in the U.S. 

BP plc, Shell PLC, TotalEnergies SE, and Repsol SA declined between 0.2% and 0.5%. 

Mulberry Group PLC declined 3.2% to 120.0 pence, and the British luxury handbag maker rejected a conditional offer from Mike Ashley-controlled Frasers Group. 

Greggs plc declined 4.2% to 2,992.0 pence after the bakery chain reported a slowdown in its core business in the latest quarter.