Higher Bond Yields and Persistent Middle East Tensions Weighed On European Markets

Bridgette Randall
07 Oct, 2024
London

Stock market indexes in Europe declined for the second session in a row, pressured by higher bond yields following the release of a robust U.S. jobs report last week. 

Benchmark indexes in Paris, London, and Frankfurt struggled to advance, and investors reviewed the latest update of German factory orders and the Euro Area retail sales. 

 

German Factory Orders Dragged Down by Volatile Large-scale Orders 

Germany's factory orders declined at a faster-than-expected monthly pace of 5.8% in August from the upwardly revised increase of 3.9% in July, the Federal Statistical Office, Destatis, reported Monday. 

The orders declined at the steepest face since January because of the weakness in large-scale orders for trains, planes, and ships. 

Incoming orders declined 3.4% from July, excluding large-scale orders.

On an annual basis, calendar-adjusted orders fell 3.9% from the corresponding month last year. 

In the capital goods and intermediate goods sectors, monthly incoming orders in August fell by 8.6% and 2.2%, respectively, while incoming orders for consumer goods fell by 0.9%.

Domestic orders fell 10.9%, foreign orders declined 2.2%, while orders from the eurozone decreased by 10.5%. 

 

Euro Area Retail Sales Edged Up In August 

Eurozone retail sales struggled to advance in August amid high costs of living as consumers restricted purchases to basic items.

Retail sales advanced 0.2% from the previous month, when sales growth was flat. 

From a year ago, retail sales rose 0.8%, as a 2.5% increase in automotive fuel overwhelmed the decline of 0.2% in food, beverage, and tobacco sales.

 

Europe Indexes and Yields

The DAX index increased by 0.2% to 19,046.54; the CAC-40 index rose by 0.5% to 7,515.22; and the FTSE 100 index declined by 0.2% to 8,245.95. 

The yield on 10-year German bonds edged higher to 2.25%, French bonds inched higher to 3.02%, the UK gilts edged up to 4.20%, and Italian bonds increased to 3.56%.

The euro edged lower to $1.09; the British pound inched lower to $1.30; and the U.S. dollar weakened to 85.73 Swiss cents.

Brent crude increased $1.81 to $79.85 a barrel, and the Dutch TTF natural gas fell by €0.44 to €40.31 per MWh. 

 

Europe Stock Movers

Richemont SA increased 0.8% to CHF 131.95 after the Swiss luxury goods maker agreed to sell its online business Yoox Net-a-Porter to the German online retailer Mytheresa. 

Richemont agreed to sell loss-making YNAP with a cash position of €555 million and provide additional revolving credit lines of €100 million in exchange for a 33% equity stake in the German online retailer. 

The transaction is expected to close in the first half of 2025, and Richemont plans to take a 1.3 billion asset write down related to the transaction, including the cash to be left in the YNAP account.

Telecom Italia S.p.A. declined 0.2% to €0.26 after the company's board authorized chief executive officer Pietro Labriola to negotiate the purchase of TI Sparkle S.p.A. 

3i Infrastructure PLC increased 0.6% to 343.50 pence, and the company received a binding offer for a 33% stake in Valorem, an independent European renewable energy company. 

Heidelberg Materials AG increased 1.8% to €99.14 following a report that the German cement company has entered into negotiations to sell its cement operations in India for as much as $1.2 billion.