European Markets Under Pressure, Eurozone Industrial Output Falls

Bridgette Randall
14 Dec, 2022
Frankfurt

European markets closed down ahead of the widely anticipated rate hike in the U.S. today and in the eurozone and the U.K. tomorrow. 

Investors were cautious ahead of rate decisions and major averages lacked direction. Resource stocks were also in focus for the second week in a row after crude oil prices extended recent gains. 

After the close, the Federal Reserve lifted its key lending rate range by 50 basis points to 4.25% and 4.5% and held out for more rate hikes. 

"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time," the accompanying statement noted. 

The Federal Reserve also lowered its 2023 GDP growth outlook to 0.5% from the previous estimate of 1.2% in September and also indicated the median fed funds rate at 5.1%. 

"Inflation is still too high and we have a long way to go before price stability, said Chairman Jay Powell at a press conference after the rate decision.  

The additional data provided by the Federal Reserve also showed that the PCE inflation, an alternative measure of consumer inflation, is not expected to drop to 2% till 2025. 

 

Stock Market Indexes Review 

Stock market indexes in the region opened lower and lacked direction and reacted to domestic corporate news. 

Investors also awaited rate decisions in the eurozone tomorrow and worried that the higher rates may be needed for a prolonged period of time to bring down high inflation induced by supply constraints. 

The DAX index edged down 0.2% to 14,460.20, the CAC-40 index dropped 0.2% to 6,730.79 and the FTSE 100 index declined 6.96 points to 7,495.93. 

 

Oil Extends Weekly Gains to Third Week 

Crude oil rose amid optimism about China reopening and the hopes of improving activities in the second largest economy. 

Brent crude oil rose $2.32 to $83.03 a barrel and the futures of immediate month delivery of Dutch TTF natural gas dropped 4.4% to 131.50 per MWh. 

 

Bond Yields Steady, Euro and Pound Advance

The yield on 10-year German Bunds increased to 1.94%, French bonds edged higher to 2.43%, the UK Gilts inched lower 3.32% and Italian bonds held steady at 3.87%.

The euro edged higher to $1.68 and the British pound to $1.242.

 

Eurozone Industrial Output Declined 

The currency block's industrial production declined more-than-expected 1.5% after all sectors expected non-durable consumer goods contracted in October. 

Eurozone industrial output declined for the first time in three months after rising for two months in a row. Output fell 2.0% in October from September, Eurostat said Wednesday.

On a yearly basis, industrial output declined 3.4%, matching expectations set by some economists. 

 

Spain Consumer Inflation Slows 

Spain's consumer price inflation slowed to 6.8% in November from 7.3% in October and continued to ease for the fourth month in a row after peaking at 10.8% in July, the INE reported Wednesday.

 

UK Inflation Eased but Stays Elevated 

Consumer prices in the island nation edged lower from the 41-year high level in October, just a day ahead of the Bank of England's rate decision. 

U.K.'s consumer price inflation slowed to 10.7% in November from 11.1% in October after transportation costs rose at a slower pace and monthly pace slowed to 0.4% from 2.0%, the ONS said Wednesday.

 

Italy Unemployment Eases Slightly 

Italy jobless rate eased and total hours worked were unchanged in the third quarter. 

Italy's seasonally adjusted jobless rate eased slightly to 7.9% in the third quarter from 8.1% in the second quarter, the statistical office Istat said Wednesday.

Total number of unemployed declined 2.6% to 1.98 million and the number of people not in the job market increased 0.2% to 12.85 million or edged up 0.1% to 34.5% in the age group between 15 and 64 years. 

 

Europe Stock Movers 

In Paris trading Arcelor Mittal and Carrefour SA dropped 3.5%. 

LVMH gained 0.4% on China reopening hopes but financial stocks trended lower after AXA, Societe Generale and BNP declined between 1% and 2%. 

TUI AG dropped 7.8% to 146 pence after the tours operator said it has agreed to repay its pandemic era debt of