02/10/2023 – 13:31
European stock markets closed sharply lower in the session this Monday, 2nd. Stock markets in the Old Continent were pressured by the rise in public bond returns globally, amid concerns about higher interest rates for longer in advanced economies. Industry indicator readings suggesting economic contraction in Europe also dampened risk appetite.
Industrial purchasing managers’ indexes (PMIs) for the euro zone, Germany and the United Kingdom were in negative territory, indicating that manufacturing activity contracted in September. “The PMIs support our projection of a slight contraction in the European economy in the second half of the year,” Danske Bank wrote in a comment to clients.
Furthermore, European bond yields followed the movement of US Treasuries.
US bond yields rose after strong US PMIs and agreement in the US Congress to avoid shutdown. “This agreement, while avoiding a crisis of confidence, brings the focus back to the resilience of the US economy and the prospect of further rate hikes by the Federal Reserve (Fed),” commented CMC Markets.
Thus, fears are also growing that other Central Banks such as the European Central Bank (ECB) and Bank of England (BoE) will be forced to maintain restrictive monetary policy for an extended period of time.
CMC Markets highlighted that the upward revision of the United Kingdom’s Gross Domestic Product (GDP) contributes to the increase in British bonds. As a result, the FTSE 100 index closed down 1.28%, at 7,510.72 points. In particular, NatWest Group shares fell 3%, with shares in the banking sector under pressure.
In the eurozone, yields on the French OAT and German 10-year Bund advanced. All in all, in Frankfurt, the DAX fell 0.91%, to 15,247.21 points; in Paris, the CAC 40 dropped 0.94%, to 7,068.16 points; in Milan the FTSE MIB lost 1.39%, to 27,849.65 points; in Madrid, the Ibex 35 fell 1.18%, to 9,317.10 points; and, in Lisbon, the PSI 20 dropped 0.42%, to 6,064.71 points. Quotes are preliminary.
On the Paris Stock Exchange, Casino’s shares plummeted 7.54%, after the French retailer – which controls GPA in Brazil – announced that it had concluded the sale of 61 stores to Les Mousquetaires.
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