Euro Area Credit Growth Decelerated In January, Stocks Advanced

Bridgette Randall
27 Feb, 2023
New York City

European markets traded higher after a week of losses and looked ahead to a busy week of earnings. 

Market sentiment was positive after indexes dropped the most in the previous week in 2023 on the hopes that the Euro Area economy will avoid a recession. 

Investors also noticed that large corporations are reporting better earnings than their competitors in Asia and the United States, despite higher energy costs. 

In economic news, lending growth in the euro zone declined in January and confidence index fell marginally in the currency block but lending growth continued to decelerate following tighter monetary policy. 

 

Euro Area Economic Confidence Index Fell Marginally

The economic confidence index in the Euro Area unexpectedly declined in January, a survey from the Economic Commission showed Monday. 

The confidence index decreased to 99.7 in January from 99.8 in December, a decline for the first time in three months. 

The confidence index monitoring expectations among manufacturers declined 0.5 in February from 1.2 in January and among service providers eased to 9.5 from 10.4 in the corresponding period. 

Despite the looming worries of consumer spending, the confidence index among retailers improved to -0.1 in February from -0.7 in January and among construction managers improved to 1.8 from 1.4 in the corresponding period.  

 

Euro Area Credit Growth Slowed In January 

The annual rate of growth in credit to the private sector declined in January, reflecting the ongoing monetary policy tightening. 

The credit growth slowed to 3.8% in December from 4.3% in January, the European Central Bank reported Monday. 

Annual growth rate of broad monetary aggregate M3 decreased to 3.5% in January 2023 from 4.1% in December and narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, decreased to -0.7% in January from 0.6% in December, the central bank noted. 

The European Central Bank has lifted its key lending rate by 300 basis points since July to tame inflation by gradually lifting rates to restrictive rates and curtailing economic activities. 

Annual growth rate of adjusted loans to households decreased to 3.6% in January from 3.8% in December and adjusted loans to non-financial corporations decreased to 6.1% in January from 6.3% in December. 

M3 money supply growth has been slowing from the recent peak in September last year and lending growth to businesses or corporations slowed for the third month in a row. 

 

Market Indexes and Yields 

The DAX index increased 1.1% to 15,381.43, the CAC-40 index advanced 1.5% to 7,295.55 and the FTSE 100 index added 0.7% to 7,935.11. 

The yield on 10-year German Bunds inched higher to 2.58%, on French bonds edged up to 3.05%, UK gilts to 3.80% and Italian bonds to 4.42%. 

The euro edged up to $1.060, the British pound increased to $1.205 and the Swiss franc edged higher to 93.61 cents.  

Brent crude oil fell 86 cents to $82.69 a barrel and the Dutch TTF natural gas spot price fell Є3.71 to Є47.30 per MWh. 

 

Europe Stock Movers 

Airbus SE increased 1.4% to €123.64 after the aviation group lifted its estimate of future demand for aircrafts in the next two decades on higher expectations of air travel and freight demand in the Pacific region. 

Thales SA increased 0.5% to €133.75 after the French defense company said it plans to hire 12,000 new employees in 2023 to support its expected business growth. 

The aerospace and cyber security company said it plans to add 5,500 new employees in France, 1,050 in the United Kingdom, 600 in Australia, 550 in India and 540 in the United States

Associated British Foods Plc increased 2.2% to 1,989.80 pence after the UK-based diversified conglomerate reported first-half revenue to increase 20% at actual exchange rates and 16% in constant currency. 

Primark sales are expected to rise 19% to £4.2 billion and adjusted operating profit margin is expected to be above 8%. 

The company also lifted its annual outlook and said adjusted operating profit and adjusted earnings per share are "expected to be inline with previous financial year."   

Bunzl Plc increased 2.4% to 3,085.0 pence after the company reported an increase in pre-tax profit. 

In 2022, revenue increased 17.1% to £12.03 billion and adjusted pre-tax increased 17.2% to £818.0 million from £698.2 million a year ago. 

The maker of cigarette filters and tissue paper and outsourcing company increased its divided 10% to 141.7 pence from 132.7 pence in 2021.