Rate Worries Overshadowed European Market Sentiment Amid Mixed Earnings Reports

Bridgette Randall
24 Feb, 2023
Frankfurt

Stocks dropped, bond yields rose and currencies looked down in Europe after inflation worries accelerated U.S. market decline. 

Stocks accelerated decline in Europe after the latest report on a measure of inflation accelerated in January. 

The closely watched consumption price index, a measure of inflation tracked by the U.S. Federal Reserve, rose at a faster pace from the previous month.  The increase was the largest since August. 

 On the inflation news, market indexes in New York fell as much as 2% and darkened the mood in Europe. 

Moreover, Germany's fourth quarter economic decline was revised to a deeper correction than previously estimated, negatively impacting market sentiment. 

Investors overlooked the improvement in the forward looking consumer confidence for March in Germany  for the fifth month in a row and a slight rebound in consumer confidence in February to its highest level in more than a year in the UK. 

The research group GfK said British consumer confidence increased by seven points to -38, the highest since April 2022, and Germany's confidence index improved to -30.5 in March from -33.8 in February.  

The French consumer confidence index fell slightly in February, according to the data released by the statistical office INSEE. 

The index decreased to 82 in February from 83 in January, reflecting moderate weakness in the financial outlook of households. 

 

Larger Decline in Germany's Economy In Fourth Quarter

Germany's gross domestic product shrank more-than-expected in the fourth quarter, the Federal Statistics Office or DeStatis said in a report. 

Gross domestic product in the fourth quarter declined 0.4% from the previous quarter compared to the previous estimate of 0.2% fall in a preliminary report. 

The German economy expanded in each of the first three quarters when measured from the previous three month period. 

Economy expanded 0.8% in the first quarter, slowed to 0.1% in the second quarter and regained momentum in the third quarter to 0.5%. 

The latest decline was the worst since the first quarter of 2021, when the economy shrank 1.5% following the Covid-19 pandemic.  

For the full-year 2022, the economy expanded 1.8% and when adjusted for calendar shift rose 1.9%, the statistical office noted. 

 

European Bond Yields Advanced, Currencies Weakened 

The DAX index declined 1.7% to 15,209.74, the CAC-40 index dropped 1.8% and the FTSE 100 index fell 0.4% to 7,878.66. 

For the week, the DAX index decreased 1.5%, the CAC-40 index declined 1.8% and the FTSE 100 index fell 1.2%. 

The yield on 10-year German Bunds increased to 2.52%, French bonds to 3.00%, the UK gilts to 3.65% and Italian bonds to 4.43%. 

The euro edged lower to $1.05, the British pound decreased to $1.194 and the Swiss franc edged lower to 94.03 cents. 

Brent crude oil advanced 96 cents to $83.19 a barrel and the Dutch TTF natural gas increased 41 cents to Є51.01 per MWh. 

 

Europe Stock Movers 

Compagnie de Saint Gobain SA increased 4.8% to €55.93 after the French building materials maker reported record annual revenues. 

In addition, the French glass maker plans to set aside "at least €400 million" for its stock repurchase program in 2023. 

International Consolidated Airlines Group declined 3.7% to 159.34 pence after the parent of British Air and Iberian Air announced a deal to acquire the remaining stake Air Europa it did not own. 

BASF SE declined 7.8% to €48.07 after the German chemical maker reported a loss in the fourth quarter and halted its stock repurchase program. 

The chemical company also plans to eliminate 2,600 positions or about 2% of its staff.