Euro and Pound Jump to Multi-month Highs After Rate Hikes

Bridgette Randall
02 Feb, 2023
Frankfurt

European markets soared after the European Central Bank and the Bank of England lifted key lending rates as advertised and investors welcomed dovish comments from Fed Chairman. 

The European Central Bank lifted its benchmark rates but also reiterated its commitment in an unusually strong language to increase rate at the meeting next month  

The European Central Bank revised its benchmark rate higher by 50 basis points to 3.0%, the level last seen in 2008 and confirmed its plan to increase by the same at the next policy meeting in March.

The Bank of England decided to increase its benchmark rate in a 7-to-2 vote by 50 basis points to 4.0%, the highest level since 2008 as policymakers battle to control forty-year high inflation.

Markets anticipated central banks actions and investors are also anticipating higher rates at next meetings in March but the recent cooling in inflation also raised hopes that policymakers may pause near the year's end. 

 

European Indexes Advanced Between 1% and 2% 

The DAX index soared 2.2% to 15,509.19, the CAC-40 index increased 1.2% to 7,166.27 and the FTSE 100 index added 0.8% to 7,820.16. 

 

Euro Rebounds to 10-month High

The euro advanced to $1.09, the British pound inched higher to $1.22 and the Swiss franc edged up to 91.25 U.S. cents. 

 

Natural Gas Price Drops to 16-month Low 

Natural gas price in Amsterdam traded down to a 16-month low amid warm weather conditions and elevated storage in the region. 

Natural gas prices continued to drift lower for the sixth week in a row after regional forecasts indicated warmer weather conditions from Scandinavia to Italy for the next week despite a mild uptick in temperatures this week. 

Brent crude oil decreased 24 cents to $82.60 a barrel and Dutch TTF spot price fell 6.3% to 55.61 per MWh. 

 

Europe Movers 

Shell Plc fell 1% to 2,341.0 pence after the oil giant reported record annual profit and launched a $4 billion stock repurchase program. 

Revenue in the fourth quarter increased to $101 billion from $85 billion a year ago after energy prices spiraled higher. 

Net income in the quarter eased to $10.4 billion from $11.5 billion and diluted earnings per share eased to $1.46 from $1.48. 

In 2022, revenue surged to $381 billion from $261.5 billion and net income soared to $42.3 billion from $21.5 billion and diluted earnings per share to $5.71 from $2.57 a year ago. 

Full year 2022 income attributable to shareholders also included net gains of $3.4 billion due to the fair value accounting of commodity derivatives.

Windfall taxes imposed by the European Union and the UK also negatively impacted earnings. 

The net income also included $2.3 billion charges related to the "EU solidarity contribution" and the UK "Energy Profits Levy," and net impairment reversals of $0.7 billion.

The oil company said it has completed its $4 billion stock repurchase program announced in the previous quarter and the company expects to complete a new $4 billion plan before the release of current quarter's results. 

Shell also increased its dividend by 15% to 28.57 a share.  

Wizz Air Holdings increased 5% to 2,787.16 pence after the deep discount airline said the number of passengers in January rose 71.3% from a year ago to 4.2 million.

Deutsche Bank AG fell 6.3% to €11.46 after the largest German bank reported weaker-than-anticipated quarterly income. 

Revenue in 2022 rose 7% to € 27.2 billion and pre-tax income increased 65% to €5.6 billion, the highest in 15 years. 

Net profit in the year more than doubled from a year ago to €5.7 billion including positive year-end deferred-tax adjustment of €1.4 billion compared to €274 million in the previous year. 

In the fourth quarter of 2022, profit before-tax was €775 million, up from €82 million a year ago on 7% growth in net revenues with a 7% reduction in noninterest expenses. 

The quarter was positively impacted by a gain of approximately €310 million on  the sale of Deutsche Bank Financial Advisors in Italy.

ING Groep NV declined 5% to €12.70 after the Dutch bank issued a weaker-than-anticipated 2023 outlook. 

Banco Santander SA increased 5% to €3.43 after the Madrid-headquartered bank reported a surge in net profit. 

Total income in the fourth quarter increased 0.4% to €13.5 billion and net income after-tax rose decreased 5% to €2.23 billion from the previous quarter. 

Total income in 2022 rose 15.7% to €52.1 billion and net income rose 18.2% to €9.6 billion. 

Electrolux AB dropped 8% to kr133.70 after the Sweden-based electrical appliances maker estimated lower sales volume in 2023. 

In full-year 2022, net sales were SEK 134,880 million and operating income excluding non-recurring items was SEK 831 million. 

Earnings declined due to lower sales volumes, as a result of weaker market demand, and production inefficiencies lifted costs higher in North America. 

In the fourth quarter, net sales amounted to SEK 35,769 million and operating income was a loss of to SEK 1,964 million, reflecting a negative operating margin of 5.5%