European Indexes Halt 2-day Slide, Turkey Lowered Key Rate

Bridgette Randall
23 Feb, 2023
Frankfurt

European market indexes closed higher after two days of declines after investors bid up energy and tech stocks. 

ASM International, BE Semiconductor and Aixtron advanced between 1% and 3% after Nvidia Corp estimated higher-than-expected sales in the first quarter.  

Energy explorers traded higher after crude oil prices rebounded and natural gas prices hovered near recent lows. 

Markets were cautious and inflation and rate worries dominated trading sentiment after the U.S. Fed meeting minutes showed policymakers commitment to increase rates until the inflation is on a sustainable downward path.

Inflation worries in the region also overshadowed market sentiment after the Euro Area inflation was slightly revised higher in January. 

 

Euro Are January Inflation Revised Higher 

The Euro Area inflation rate was revised higher in January, although the inflation slowed for the third month in a row,  the rate remained elevated, Eurostat reported Thursday. 

Inflation in January was upwardly revised to 8.5% from the previous estimate of 8.5% but lower than 9.2% in December, the statistical office of the European Union reported.

On a monthly basis the harmonized index of consumer prices declined 0.2% in January compared to the previous estimate of 0.4% decline. 

Core inflation rate excluding food, alcohol, energy and tobacco increased to 5.3% in January from 5.2% in December. 

The three countries with the lowest annual inflation rates were Luxembourg (5.8%), Spain (5.9%) and Cyprus and Malta (both 6.8%).  

The three countries with the highest annual inflation rates were Hungary (26.2%), Latvia (21.4%) and Czechia (19.1%). 

 

Turkey Lowered Key Lending Rate 

Turkey's central bank lowered its key lending rate by 50 basis points, in an attempt to support the economy in the aftermath of the devastating earthquake. 

The central bank lowered its key lending rate to 8.5% from 9.0% after holding rates for two months in a row. 

The Central Bank of Republic of Turkey held its key lending rate at 9.0% in January after inflation eased to a nine-month low of 64% from 85.0% in the previous month. 

"While the earthquake is expected to affect economic activity in the near term, it is anticipated that it will not have a permanent impact on performance of the Turkish economy in the medium term. 

While the share of sustainable components of economic growth increases, the stronger than expected contribution of tourism revenues to the current account balance continues throughout the year. 

On the other hand, domestic consumption demand, high level of energy prices and the weak economic activity in main trade partners keep the risks on current account balance alive," noted the CBRT in a statement released Thursday. 

 

European Markets and Yields 

The DAX index increased 0.5% to 15,475.69, the CAC-40 index rose 0.3% to 7,317.43 and the FTSE 100 index declined 0.3% to 7,907.72. 

The yield on 10-year German Bunds inched lower to 2.47%, French bonds edged lower to 2.96%, the UK Gilts declined 3.59% and Italian bonds fell to 4.37%. 

The euro hovered near $1.059, the British pound traded near $1.202 and the Swiss franc traded higher to 93.35 U.S. cents. 

Brent crude oil rebounded $1.61 to $82.21 a barrel and the Dutch TTF natural gas prices inched slightly higher to Є50.72 per MWh. 

 

Europe Movers 

Essilor Luxottica SA declined 4.3% to €167.15 after the Franco-Italian eyewear maker reported an increase in fourth quarter earnings. 

Stocks turned lower on the company's cautious outlook for 2023. 

The company reiterated its target "of mid-single-digit annual revenue growth from 2022 to 2026 at constant  exchange rates and estimated an adjusted operating profit  as a percentage of revenue in the range of 19% to 20% by the end of that period.

AXA SA increased 3.2% to €28.71 after the France-based property insurance company announced a stock repurchase plan. 

Gross revenue in 2022 increased 2% to €102 billion and underlying earnings per share increased 12% to €3.08 from a year ago. 

The insurance group also announced a stock repurchase program of up to 1.1 billion. 

WPP Plc increased 3.3% to  1,049.94 pence after the UK-based advertising company forecasted higher than expected in the year ahead. 

Gross revenue in 2022 increased 12.7% to 14.4 billion and profit before-tax increased 22% to 1.2 billion and diluted earnings per share increased to 61.2 pence from 52.5 pence a year ago. 

The advertising agency estimated comparable sales in 2023 to increase between 3% and 5%, slower than 6.7% in 2022 but ahead of expectations. 

The company also guided operating margin in 2023 to improve to 15% from 13.5% in 2022. 

Rolls Royce Holdings Plc soared 20.5% to  129.73 pence after the aerospace and defense company reported higher-than-expected earnings. 

The defense contractor and power systems maker guided underlying operating profit in 2023 between £0.8 billion and £1.0 billion and free cash flow between £0.6 billion and £0.8 billion. 

Total revenue in 2022 increased to £13.5 billion from £11.2 billion and pre-tax loss increased to £1.5 billion from £294 million in the previous year.