Stronger Earnings Pared European Indexes Fall, German PPI Dropped to 17-month Low

Bridgette Randall
17 Feb, 2023
Frankfurt

European markets faced headwinds but managed to trim losses after stronger corporate results provided support for riskier assets. 

Benchmark indexes were under pressure after two Federal Reserve officials called for strong rate hikes at the next policy meetings in March after wholesale inflation and retail sales were ahead of expectations. 

Loretta Mester and James Bullard supported the case for a larger rate increase of 50 basis points. 

Investors stepped up stock exposure after banks, insurance and industrial companies and logistics and transportation companies generally reported better-than-expected results. 

Investors also reviewed the latest earnings from Allianz SE, Daimler Benz AG, NatWest, SEGRO and Air France KLM. 

For the week the DAX index gained 1%, the CAC-40 index advanced 2.6% and the FTSE 100 index rose 1.5%.  

 

Weaker Energy Prices Drag German PPI Down to 17-month Low  

Germany's producer price index decreased for the fourth month in a row and declined to the level last seen 17 months after natural gas prices steadily declined. 

The producer price index eased to 17.8% in January from 21.2% in December, data from Destatis or Federal Statistics Office showed Friday. 

The latest inflation rate was the weakest since August 2021, when prices had rose 14.2% from a year ago.  

 

French Consumer Inflation In January Reaffirmed 

Consumer price inflation in January rose slightly as previously estimated, the final data from the statistics office INSEE showed Friday. 

Consumer price index increased 6.0% from a year ago in January after rising 5.9% in December, matching the previous estimate released on January 31. 

Energy price inflation accelerated to 16.3% in January from 15.1% in December and food prices rose 13.3% from 12.1%. 

 

Promotions Drove UK Retail Sales Rebound In January 

UK retail sales unexpectedly increased 0.5% in January from the previous month driven by sales promotion, the Office for National Statistics reported Friday. 

January sales rose following a 1.2% decline in December and 0.6% fall in November after promotions brought back consumers to stores. 

Excluding auto fuel, retail sales rose 0.4%, reversing 1.4% decline in December. 

 

Swiss Industrial Production Expands In Q4 

Swiss industrial production expanded in the fourth quarter at a slightly faster pace than in the third quarter, Federal Statistics Office data showed Friday. 

Industrial production increased 6.0% in the final quarter of 2022 from 5.9% in the third quarter. 

Manufacturing sector expanded 7.9%, while the mining and quarrying segment shrank 3.0% and electricity supply declined 10.3%. 

 

Europe Markets Review 

The DAX index fell 0.3% to 15,482.00, the CAC-index declined 0.3% to 7,347.72 and the FTSE 100 index eased 0.1% 8,004.36. 

The euro inched higher to $1.068, the British pound edged up to $1.202 and the Swiss franc traded near 92.56 U.S. cents. 

The yield on 10-year German Bunds increased to 2.43%, French bonds closed down at 2.89%, the UK Gilts at 3.50% and Italian bonds at 4.27%. 

Brent crude oil declined $2.90 to $82.21 a barrel and the Dutch TTF natural gas futures dropped to Є49.40 per MWh.   

 

Europe Movers 

Allianz SE declined 1.9% to €216.95 after the insurance and asset management group reported a decline in its assets under management and in non-life operations. 

Daimler Benz Group AG increased 2.4% to €74.64 after the vehicle maker reported better-than-expected financial results and said it plans to repurchase Є4 billion of its stocks over the next two years. 

Sika AG increased 4.9% to  Sfr276.90 after the Swiss chemical company reported fiscal year 2022 net income increased 11%. 

Swiss Re AG was nearly unchanged at 96.14 after the Swiss reinsurance group reported a decline in fiscal 2022 earnings. 

Air France KLM SA increased 5.3% to €1.76 after the French-Dutch airline forecasted higher margin and strong bookings in 2023. 

NatWest Group Plc declined 6.5% to 285.62 pence despite the British bank reporting stronger operating results in 2022. 

SEGRO PLC increased 0.9% to 843.57 pence after the UK-based warehouse company reported a rebound in operating results in 2022. 

Smith & Nephew Plc declined 0.2% to  1,154.93 pence after the UK-based prosthetic devices maker nominated a new chairman.