Rate Worries Resurfaced In Europe, UK Economy Avoided Technical Recession

Bridgette Randall
10 Feb, 2023
Frankfurt

European markets closed down after central bankers in the U.S. and Germany stressed the need to keep revising rates higher to restrictive levels.

Bundesbank's president, Joachim Nagel, reaffirmed his stance for interest rate increases and said that decisive actions are needed from the European Central Bank in bringing down inflation expectations near 2%.

German bond yields advanced following Nagel's comments and stocks turned lower.  

The DAX index declined 1.4% to 15,307.98, the CAC-40 index dropped 0.8% to 7,129.73 and the FTSE 100 index fell 0.4% to 7,882.45.

The euro edged lower to $1.06, the British pound weakened to $1.204 and the Swiss franc closed down 92.51 U.S. cents.

The yield on 10-year German Bunds inched higher to 236%, French bonds to 2.83%, UK Gilts to 3.39% and Italian bonds to 4.21%.

Brent crude gained $1.90 to $86.41 a barrel and the Dutch TTF natural gas spot price rose 2% to 53.95 per MWh.

 

UK Economy Avoids Technical Recession In Q4

The UK economy managed to avoid back-to-back quarterly economic growth declines in the fourth quarter but the economy is still expected to face more challenges in the year ahead.

GDP stabilized in the fourth quarter after shrinking 0.2% in the third quarter, the Office for National Statistics reported Friday.

In 2022, the UK economy slowed to 4.0% annual growth from 7.6% in 2021 as high inflation driven by elevated energy prices kept consumer spending in check and businesses from expanding.

The Bank of England forecasted the economy to shrink 0.1% in the first quarter and 0.5% in 2023 as the island nation battles high energy prices, Brexit induced supply shock and the aftermath of Covid-pandemic.