Rate Moderation Hopes Power European Rally, German Inflation Stays at 10%

Bridgette Randall
13 Dec, 2022
Frankfurt

Market averages in Europe soared following the easing of inflation in the U.S. and resource stocks advanced amid optimism about China's unwinding of coronavirus restrictions. 

Benchmark indexes shot up after the consumer prices in November rose at a slower pace of 7.1% in November following 7.7% in October, the U.S. Bureau of Labor Statistics reported Wednesday. 

Monthly rate of inflation eased to 0.1% in November from 0.4% in October after energy prices declined, food inflation moderated but housing prices remained elevated. 

The inflation cooled more than expected stoking optimism that the U.S. Federal Reserve may moderate its rate hike to 50 basis points after the end of the policy meeting tomorrow and the European Central Bank may also moderate its rate hike to 50 basis points on Thursday. 

The bond yields traded down and the euro and the British pound rebounded to multi-month highs. 

The 10-year German Bund yield declined to 1.918%, French bonds dropped to 2.39%, the UK gilts eased to 3.304% and Italian bonds inched lower to 3.804%. 

The euro rebounded to the level last seen in mid-June and traded up to $1.645 and the British pound gained to close at $1.235. 

 

Europe Market Indexes Soar

European market indexes advanced on the hopes of rate moderation by the Federal Reserve and the Bank of England tomorrow and the European Central Bank on Thursday. 

The DAX index increased 1.3% to 14,497.89, the CAC-40 index added 1.4% to 6,744.98 and the FTSE 100 index advanced 0.7% to 7,502.89. 

 

German Consumer Price Inflation Eases 

Consumer price index in Germany eased to 10.0% in November from 10.4% in October, the Federal Statistics Office said Tuesday. 

"Despite a slight easing in energy prices, the inflation rate remains at a high level of +0.0%," says Dr. Georg Thiel, President of the Federal Statistical Office.