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European Equity Benchmarks Close Higher; EU Regulator Forecasts Deteriorating Outlook for Asset Managers

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Last updated: 09/10/2019 13:00:22

01:00 PM EDT, 09/10/2019 (MT Newswires) -- The broad-based major European indices closed higher in Tuesday trading as bank stocks helped lift the markets higher.

In economic news, the European Securities and Markets Authority (ESMA), the EU's securities regulator, has published a report that forecasts a deteriorating outlook for the asset management industry and continued very high market risk. The report said recent trade tensions have triggered renewed volatility, and concerns over a no-deal Brexit remain key risk drivers for the second half of 2019.

The ESMA said investors are facing very high market risk due to an environment of potentially inflated asset valuations, subdued economic growth prospects, and flattening yield curves. Changed monetary policy expectations may increase risk appetite and reignite search-for-yield strategies, which could leave investors open to high volatility, and wild swings in market sentiment.

Credit risk and liquidity risk remain high, said the report. While the level of credit risk is stable, the deteriorating quality of outstanding corporate debt, the growth in leveraged loans and collateralized loan obligations should warrant the attention of public authorities. As a result, ESMA said its risk outlook for the asset management sector has deteriorated.

In the UK, the employment rate for the months of May through July was estimated at 76.1%, which is tied for the highest on record since comparable records began in 1971, and up from 75.5% a year earlier, according to the Office for National Statistics (ONS). Meanwhile the unemployment rate was estimated at 3.8%, down from 4.0% at the same time last year, and unchanged from the previous quarter.

The UK economic inactivity rate was estimated at 20.8%, down from 21.2% a year earlier, and unchanged from the previous quarter. Estimated annual growth in average weekly earnings for employees in the UK increased to 4.0% for total pay (including bonuses), and fell to 3.8% for regular pay (excluding bonuses). In real terms (after adjusting for inflation), annual growth in total pay was estimated to be 2.1%, while annual growth in regular pay is estimated to be 1.9%.

In Germany, the Federal Statistical Office (Destatis) reported that turnover in the main construction industry in June was down 3.3% compared with the same month last year. At the end of June the number of people employed by main construction industry firms increased 1.6% compared with the same time last year.

In France, net payroll job creation reached 56,200 in Q2, which is up 0.2% after rising 0.4% in the previous quarter, according to the Institute for Statistics and Economic Studies (INSEE). Payroll employment increased 45,800 in the private sector, down from 100,400 jobs the previous quarter, and increased in the public sector, increasing adding 10,500 jobs after adding 2,200 in Q1. Year on year, employment rose 269,900 (+1.1%) with 251,200 jobs in the private sector and 18,700 jobs in the public service.

INSEE also reported that output increased slightly in the manufacturing industry in July, rising 0.3%, after falling 2.2% in June. Over the last three months, output declined 0.3% in manufacturing industry and increased 0.4% in the whole industry. Manufacturing output of the last three months increased 0.7% compared with the same three months of 2018, and increased 1.2% in the whole industry.

And in Italy, the seasonally adjusted industrial production index decreased 0.7% compared with the previous month, according to the Italian National Institute of Statistics (Istat).. The percentage change of the average of the last three months with respect to the previous three months was -0.3%. The calendar adjusted industrial production index decreased 0.7% compared with July 2018 -- there was one fewer working day in July 2018.

In equities, banks helped boost the FTSE in London as Barclays, Lloyds Banking Group, and Standard Chartered climbed 4.9%, 4.3%, and 3.6% respectively. Sports-fashion retail company JD Sports Fashion led all gainers surging 8.8%, while airline operator International Consolidated Airlines, and software firm Micro Focus International rose 4.1% and 4% respectively.

In Frankfurt, tire maker Continental, and industrial group Thyssenkrupp led the DAX into positive territory rising 3.5% and 3.4% respectively, followed by airline operator Lufthansa, and pharmaceutical firm Bayer, which gained 3.2% and 2.7%. Chemicals company BASF, and natural gas and electricity provider E.ON were up 2.6% and 2.2%, while industrial conglomerate Siemens closed 1.9% higher.

And in Paris, commercial real estate developer Unibail-Rodamco, and construction materials supplier Saint-Gobain helped nudge the CAC higher climbing 5.4% and 4.1% respectively, followed by steel and mining company ArcelorMittal, and supermarket operator Carrefour, which were up 3.4% and 2.5%. Banks also buoyed the market as Credit Agricole, BNP Paribas, and Societe Generale rose 2.2%, 1.9%, and 1.6% respectively.

The FTSE gained 0.44%, the DAX rose 0.35%, and the CAC-40 edged 0.08% higher.

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