Euro Area Economy Stagnated, Germany's Retail Sales Declined

Bridgette Randall
08 Mar, 2023
Frankfurt

European markets lacked direction after investors weighed the latest comments from central bankers and economic data. 

Market indexes opened lower following the comments from the Federal Reserve Chairman Jerome Powell suggested larger rate hikes may be necessary to cool inflation. 

Closer to home, the European Central Bank next week is set to raise rates for the sixth time in a row to cool sky-high inflation driven by high energy prices. 

Investors are anticipating a rate hike of 50 basis points. 

On Monday, Governor of Austria's central bank Robert Holzmann said that the rates should be revised higher by the same amount at the next four meetings in a row. 

Despite the previous five rate hikes, rates are still not restrictive enough in cooling inflation. 

The ECB's main deposit rate is 2.5% and consumer price in the Euro Area is hovering around 8.5%. 

 

Germany's Industrial production Expanded In January

Germany's industrial production unexpectedly rose 3.5% in January and reversed the 2.4% decline in December, the Federal Statistics Office or Destatis reported Wednesday. 

Industrial production rose after intermediate goods demand surged 6.9% driven by a rise in demand for chemical and electronic equipment, the report showed. 

On other hand, production of consumer goods fell 1.8% and capital goods output decreased 0.6%.

On an annual basis, the industrial production declined 1.6% after falling 3.3% in December. 

 

Germany's Retail Sales Declined 

Retail sales in January fell 0.3% after adjusting for inflation from the previous month, the latest data from Destatis showed. 

January's retail turnover declined 6.9% from the previous year after higher prices and elimination of energy subsidies forced consumers to retrench. 

 

Euro Area Economy Stagnated In Q4 

Economy in the Euro Area stagnated after the latest downward revision in the fourth quarter, Eurostat said in a report today. 

GDP expanded 0.4% in the fourth quarter, matching the rate in the third quarter. 

Positive contributions from government spending and international trade were offset by the decline in consumer spending and investments. 

On an annual basis, the fourth quarter's GDP expansion was downwardly revised to 1.8% from the previous estimate of 1.9% and slower than 2.4% in the third quarter. 

The Euro Area's economy expanded 3.5% in 2022 after rising 5.3% in 2021.  

 

Indexes & Yields 

The DAX index increased 0.5% to 15,631.87, the CAC-40 index fell 0.2% to 7,324.76 and the FTSE 100 index closed up 0.1% to 7,929.92. 

The yield on 10-year German Bunds decreased to 2.65%, French bonds inched lower to 3.14%, UK gilts to 3.78% and Italian bonds to 4.43%. 

The euro edged lower to $1.05, the British pound eased to $1.183 and the Swiss franc closed at 94.12 cents. 

Brent crude oil fell 50 cents to $82.76 a barrel and the Dutch TTF natural gas eased 15 cents to $2.53 a thermal unit.  

 

Europe Stock Movers 

 Adidas AG fell as much as 3% but recovered to close higher 2.2% to €147.50 after the athletic footwear maker reported disappointing 2022 sales. 

Net sales in 2022 increased 6% to $23.8 billion but operating profit fell 66% to $705.4 million. Sales in the fourth quarter struggled after the company severed its relationship with the rapper Kanye West. 

The ending of relationship with Ye cost the company $633 million in fourth-quarter sales.   

Continental AG increased 7.6% to €78.26 after the automotive tires maker estimated earnings and margins to improve in 2023. 

Symrise AG increased €96.14 after the flavor and fragrance maker forecasted core 2023 profit below expectations of some investors. 

Thales SA declined 3.6% to €127.85 despite the French defense group reporting higher sales and earnings for 2022. 

Restaurant Group PLC plunged 15.3% to 38.36 pence after the company reported a wider loss in the financial year 2022. 

Admiral Group plc fell 4.1% to 2,003.0 pence after the UK-based financial services company proposed a lower dividend following the sharp decline in profit. 

Legal & General Group plc fell 1.6% to 261.61 pence despite the UK-financial services company reporting a solid increase in earnings in 2022. 

Hill & Smith PLC decreased 6.1% to 1,327.67 pence despite the infrastructure and transportation solutions provider reporting nearly two-third increase in pre-tax earnings in 2022.