Broad Money Supply Growth Slowed In Europe, Rolls Royce Chief Warns of "Last Chance"

Bridgette Randall
27 Jan, 2023
Frankfurt

European markets advanced in cautious trading ahead of rate decisions from three central banks and the deceleration in broad money supply growth signaled the impact of higher rates.  

The European Central Bank and Bank of England are expected to announce rate decisions on Thursday following the rate decisions from the U.S. Federal Reserve on Wednesday. 

The challenging economic conditions were highlighted in the latest monetary aggregate monthly report released by the European Central Bank. 

The annual growth rate of the broad monetary aggregate M3 fell to 4.1% in December 2022 from 4.8% in November, averaging 4.7% in the three months up to December.

Investors turned cautious after the release of the U.S. personal income and spending report. 

Real personal spending declined for the second month in a row in December, the Bureau of Economic Analysis said Friday. 

 Personal income growth slowed to 0.2% in December and spending declined 0.2%. 

 

European Indexes Close Higher In Cautious Trading

The DAX index increased 13.01 points to 15,145.86, the CAC-40 index fell 11.68 points to 7,084.31 and the FTSE 100 index rose 4.04 points to 7,765.15. 

For the week, the DAX increased 0.9%, the CAC-40 rose 1.5% but the FTSE 100 index was fractionally lower. 

The euro inched down to $1.08, the British pound edged lower to $1.238 and the Swiss franc weakened to 92.06 U.S. cents. 

Brent crude oil edged 64 cents to $86.84 a barrel and the Dutch TTF natural gas futures increased 2.4% to €56.16 per MWh. 

Bond yields advanced after the release of the U.S. personal spending and income report indicating stubborn inflation. 

The yield on 10-year German Bunds rose to 2.24%, French bonds increased to 2.70%, UK gilts to 3.33% and Italian bonds to 4.22%. 

 

Europe Stock Movers 

LVMH was nearly unchanged at €801.0 after the luxury products maker reported a 9% rise in organic sales in the fourth quarter. 

Fourth quarter revenue increased to €22.7 billion and full-year 2022 revenues rose to 23% to €79.2 billion and net income from recurring operations increased 23% to €21.1 billion. 

Net profit increased 17% to €14.1 billion and operating free cash flow surpassed €10 billion. 

H&M Hennes & Mauritz AB decreased 4.1% to Swedish krona 125.80 after the fashion retailer's operating profit missed expectations set by some investors. 

In Frankfurt, Heidelberg Materials increased 2.7% to €61.72 and Adidas increased 2.1% to €148.30. 

J Sainsbury Plc increased 4.7% to  250.75 pence and the company confirmed that an investment group Bestway Group intends to acquire 3.45% stake in the retailer for "investment purposes and looks forward to supporting the  executive management team."

Rolls Royce Holdings PLC decreased 3.6% to 109.38 pence after the recently appointed chief executive in a meeting with employees made cautious remarks. 

"Every investment we make, we destroy value" and added "we underperform every key competitor," said Tufan Erginbilgic, the former BP executive who replaced Warren East as chief executive at the start of 2023. 

Erginbilgic is expected to announce sweeping changes and restructure operations and. 

The largest engineering company in the UK has lost nearly two-third of its market value in the last five years, a critically important company for the UK government for its military capabilities. 

Despite the two restructurings carried out by the company since 2018, the aerospace company has struggled after the pandemic halted worldwide air travel and the rebound since then has been slow. 

The company's revenues are tied to the operating aircraft engine hours, linking the financial performance to the ups and downs of the air travel industry.