European stock markets rebounded from earlier lows on Thursday, led by gains in the STOXX 600 Index, which rose 0.5% to 649.10, after a 0.7% drop on Wednesday. The German DAX and London’s FTSE 100 each advanced 0.7%, while France’s CAC 40 edged up 0.1%. Meanwhile, German 10-year Bund yields fell 1.2 percentage points, reversing earlier gains and pulling back from 2011-era highs of 3.37%.
The rebound came as weak U.S. payrolls data—where private employment rose by just 38,000 in August, below expectations—undermined expectations for further central bank tightening. The S&P Global Eurozone Composite PMI held steady at 52.0 in August, marking an eight-month high, though services sector pressures remained elevated, with input and output price pressures rising to three-month peaks. The ECB’s upcoming meeting on September 10 remains a focal point, with analysts suggesting a tightening stance may be warranted amid persistent inflation pressures.
Eurozone producer prices surged in July, defying expectations, with month-on-month inflation accelerating to 1.6% from a 0.3% decline in June. Year-on-year, producer inflation climbed to 5.8% from 4.6%, driven largely by energy costs, which rose 5.6% MoM and 12.9% YoY. Industrial prices excluding energy were flat, but broader inflation pressures expanded across regions: Spain and Italy saw 3.0% MoM increases, while Ireland led with a 4.3% rise. Producer prices excluding energy rose to 3.1% YoY from 3.0%, with intermediate-goods inflation at 6.3% and capital-goods inflation at 2.6%. Only non-durable consumer goods deflated further, falling 0.7% MoM.
Commodities also reflected broader market sentiment. WTI crude oil rose 0.9% to $91.83, while Brent crude gained 0.64% to $96.24, remaining elevated due to lingering Strait of Hormuz tensions. Gold surged 2.6% to $4,537.65, and silver climbed 2.8% to $30.20. New York Fed President John Williams signaled caution, stating a ‘wait and see’ approach toward rate decisions.
The mixed signals—strong producer prices but weak payrolls—highlight divergent economic pressures, complicating central bank decisions and market expectations for further monetary policy adjustments.
