China Linkages Worry European Corporations, UK Auto Production Rebounds

Bridgette Randall
28 Nov, 2022
Frankfurt

European markets traded down led by weak resource sector stocks and growing anger against zero-Covid policy in China sparked a fresh wave of unrest. 

Automakers led the decline amid rising fears that a Chinese government crackdown may impact operations and disrupt economic activities. 

ECB President Christine Lagarde said inflation is high and has not peaked yet and the central bank is not through raising interest rates. 

Lagarde was addressing lawmakers at the European Parliament's Committee on Economic Affairs.  

Consumer price Inflation in the 19-member eurozone rose to 10.6% in October and Lagarde said there are too many uncertainties to determine when the inflationary forces are likely to recede. 

The European Central Bank is expected to lift rates by at least 50 basis points following its next rate setting committee's meeting on December 15. 

This year, the central bank ended net bond purchases and lifted rates three times in a row since July but interest rates at 2.0% are still considerably lagging inflation hovering above 10%. 

The surge in core inflation was initially mainly supply driven factors, but the importance of demand factors increased  over time as the economic activities picked up and the labor market remained tight. 

Policymakers are also struggling with record spread in inflation rates in the currency union with France reporting the lowest rate 0f 7.1% and the rate of 22.5% in Estonia in October. 

The DAX index fell 1.1% to 14,383.36, the CAC-40 index declined 0.7% to 6,665.20 and the FTSE 100 index dropped 0.2% to 7,474.02. 

The benchmark Swiss Market Index closed down 5.87 points to 11,162.16. 

Brent crude oil declined 30 cents to $83.30 a barrel and Dutch TTF natural gas eased 0.9% to 123.28 euros a MWh. 

The euro edged down to $1.035 and the British pound extended recent gains to $1.197. 

The yield in 10-year German Bunds increased to 1.99%, French bonds t0 2.66%, the U.K. Gilts to 3.12% and Italian bonds to 3.91%. 

 

UK Automobile Production Rebounds

UK automakers production increased 7.4% in October reversing a 6.0% decline in September, the Society of Motor Manufacturers and Traders reported Friday. 

Automobile production rose to 69,524 units but 48.4% below the pre-pandemic level of 134,669 units in October 2019. 

Luxury automobile exports dominated the production rebound, with exports increasing 6.3% to 56,469 units and domestic sales rising 12.5% to 13,055. 

For the year-to-date to October, automobile production declined 10.8% to 643,755 from 721,509 a year ago. 

   

Europe Stock Movers 

Brenntag fell 9.7% to