Business Climate In Germany and France Improved Despite Elevated Inflation

Bridgette Randall
22 Feb, 2023
Frankfurt

European markets closed mixed after a day of lackluster trading. 

Market sentiment was dominated by the latest corporate earnings releases with the lingering worries of rate hikes and state of consumer spending. 

Investors were cautious ahead of the release of the U.S. Fed's latest minutes of meeting. 

The minutes released after the close of market hours showed all policymakers supported the rate increase of 25 basis points and anticipated rates to continue to rise in future until the inflation is on the path towards a target rate of 2%.  

Inflation reports from Germany and Italy showed that prices are expected to rise at elevated levels for some time but indicators of manufacturing and businesses showed improvements. 

 

Germany's Business Climate Index Notched Up 

Germany's IFO Business Climate Index increased to an eight-month 91.1 in February from a revised 90.1 in January, the data from the Munich-based Ifo showed Wednesday. 

 

France's Manufacturing Confidence Improved 

France's manufacturing confidence index increased for the third month in a row in February on the back of rising new orders, the statistical office Insee said Wednesday. 

 

Italy's Inflation Eased In January

Italy's consumer price inflation in January eased to 10.0% from 11.6% in December, ISTAT report released on Wednesday showed. 

Core inflation, which excludes energy and unprocessed food prices, accelerated to 6.0% in January from 5.8% in December. 

The sharp decline in energy price inflation dragged the overall inflation rate in January. 

Prices of regulated energy declined 12.0% in January from a whopping 70.2% surge in December, while those of non-regulated energy increased at a slower pace of 59.3%.

Service inflation increased to 4.2% in January from 4.1% in the previous month. 

  

Germany's January Consumer Inflation Accelerated 

Germany's consumer price inflation accelerated in January as previously estimated, the Federal Statistics Office Destatis confirmed today. 

Consumer price inflation increased to 8.7% in January from the downwardly revised 8.1% in December. 

 

Europe Indexes and Yields 

The DAX index increased 2.27 points to 15,399.89, the CAC-40 index declined 9.39 points to 7,299.26 and the FTSE 100 index fell 0.6% or 47.12 points to 7,930.63. 

The euro inched lower to $1.0603, the British pound held at $1.204 and the Swiss franc inched higher to 93.15 U.S. cents. 

The yield on 10-year German Bunds increased to 2.53%, French bonds edged higher to 3.01%, the UK Gilts to 3.61% and Italian bonds edged up to 4.47%. 

Brent crude oil decreased to $2.59 to $80.45 a barrel and the Dutch TTF natural gas spot price rose 4% to Є50.57 per MWh. 

 

Europe Movers 

Danone SA increased 4.5% to €54.66 after the French yogurt maker reported the fastest sales increase in more than a decade in 2022. 

Revenue in the fourth quarter increased 12.3% to Є7.0 billion and comparable sales rose 7% and volume mix growth declined 4.4%. 

In the full-year 2022, revenue increased 13.9% to 27.7 billion and comparable sales increased 7.8% and volume mix growth declined 0.8%. 

Sales in North America increased 20.6% to €6.7 billion, in Europe increased 5.2% to €8.7 billion and rest of the world excluding China and North Asia increased 18.7% to €8.7 billion.   

Net income in the full-year 2022 declined to €1.0 billion from €1.9 billion in 2021 or 1.48 from 2.94 a share respectively. 

Lloyds Banking Group PLC decreased 2.6% to 49.62 pence after the British banking and insurance company reported flat annual income in 2022. 

Total income in 2022 increased 14% to £18 billion from £15.7 billion and after-tax income declined 6% to £5.6 billion from £5.9 billion a year ago and diluted earnings per share fell to 7.3 pence from 7.50 pence a share respectively. 

The financial services company announced its plan of a final dividend of 1.60 pence a share resulting in a total dividend of 2.40 pence and announced a new stock buyback plan in 2023 of £2 billion matching the repurchase in 2022 and 2021. 

Rio Tinto plc declined 1.7% to  6,096.19 pence after the mining company cut its annual dividend and it reported a 38% decline in annual profit in 2022.

The Anglo-Australian mining company reiterated its unit production cost estimate for iron ore in 2023 between $21.0 and $22.50, slightly higher than $21.0 in 2022. 

Pilbara iron ore production in 2023 is estimated to increase between 322 million tons and 335 million tons, higher than 320 million tons in 2022.  

Consolidated revenue in 2022 declined to $55.6 billion from $63.5 billion and net income dropped to $13 billion from $22.6 billion and diluted earnings per share fell to $7.62 from $12.95 in the previous year. 

Mining companies traded lower after metals prices weakened on the worries that the rebound in China's manufacturing activities may be slower than anticipated. 

Glencore, Anglo American and Antofagasta declined between 2% and 3%. 

Fresenius Medical SE & Co increased 7.4% to €39.8 after the dialysis services provider reported better-than-expected fourth quarter results. 

Revenue in the fourth quarter increased 7% to €10.6 billion and net income fell 15% to €445 million. 

In 2022, revenue increased 9% to €40.8 billion and net income fell 7% to €1.7 billion. 

The company said it plans to separate its medical care company and continue to hold 32% stake in the newly separated company after the shareholder approval. 

The medical care company will focus on medical care, biopharmaceuticals and medical technology units. 

The company guided 2023 operating earnings in constant currency is expected to "remain broadly flat  or decline up to a mid-single-digit percentage rate."

Stellantis NV rose 2.2% to €16.22 after the parent of Chrysler and Fiat posted better-than-expected annual results and announced a new stock repurchase plan. 

Revenue in 2022 increased 18% to €179.6 billion and net profit rose 26% to €16.8 billion. 

The company announced a stock repurchase program of €1.5 billion to be completed before the end of 2023 and €4.2 billion of ordinary dividend corresponding to €1.34 per share. 

Industrial free cash flow in 2022 increased 78% to €10.8 billion from €6 billion in the previous year. 

The automotive company estimated sales in North America, Europe and India and Middle East to increase by 5% in 2023. 

Sales in South America are estimated to rise 3% and in China by 2% in 2023. 

Vehicle sales in Europe to 2.6 million from 2.86 million and in North America slightly edged up to 1.86 million from 1.82 million in 2021.