UK Inflation Accelerated, Euro Area Current Account Surplus Expanded

Bridgette Randall
22 Mar, 2023
Frankfurt

European markets broadly advanced after calmness returned to financial markets.

Coordinated actions between governments and central banks soothed market nerves after the rescue of the second largest bank in Switzerland. 

Bond yields were stable and the euro advanced after the ECB president Christine Lagarde said, in her prepared remarks ahead of a conference, "inflation is still high, and uncertainty around its path ahead has increased."

While energy price inflation is easing but domestic prices are still rising and "If this continues and aggregate demand picks up from its current compressed levels, we could see a handover from imported to domestic price pressures that keeps overall price pressures high," noted Lagarde in the statement. 

Real wages have declined in the Euro Area and rising wages are likely to contribute to higher inflation in the months ahead. 

 

Euro Area Current Account Surplus Expanded In January 

The current account surplus in the Euro Area increased in January after the international goods surplus increased, the European Central Bank said in a report Wednesday. 

The current account surplus increased to Є17.0 billion from Є13.0 billion in the previous month, reflecting €14 billion surplus in international trade in services, €11 billion surplus in goods and €1 billion rise in primary income. 

These surpluses were partly offset by a deficit of €9 billion in secondary income. 

Current account deficit was €98 billion or 0.7% of the euro area GDP in 12 months to January, compared with a surplus of €252 billion or 2.0% one year earlier. 

Separately, the Swiss National Bank said current account surplus widened to Sfr 14.7 billion in the fourth quarter of 2022 from Sfr 9.1 billion in the same period a year ago.  

 

UK Inflation Accelerated In January  

Consumer price inflation unexpectedly increased in February after falling for four month in a row, the Office for National Statistics reported Wednesday. 

Consumer prices rose at a faster pace of 10.4% in February after rising at 10.1% in January, after food and non-alcoholic beverages inflation accelerated to 18.0% from 16.7% in the previous month. 

Restaurant and hotel price inflation increased to 12.8% in February from 10.1% in January and apparel and footwear inflation increased to 8.1% from 6.2% and health services cost increased 6.8% from 6.2% in the previous month. 

On the other hand, transportation services inflation slowed to 2.9% from 3.1% and housing and utilities prices rose at a slower pace of 26.6% from 26.7% in the previous month. 

On a monthly basis consumer prices advanced 1.1% from January.   

 

Indexes & Yields 

The DAX index increased 0.1% to 15,216.19, the CAC-40 index advanced 0.2% to 7,131.12 and the FTSE 100 index gained 0.4% to 7,566.84.  

The yield on 10-year German Bunds held at 2.28%, French bonds closed at 2.83%,the UK gilts edged up to 3.44% and the Italian bonds increased to 4.14%. 

The euro strengthened to $1.08, the British pound to $1.22 and the Swiss franc to 91.82 cents. 

 

Europe Movers  

Banks across the eurozone eased after rebounding in the previous session. 

Deutsche Bank, Commerzbank, BNP Paribas, HSBC, Societe Generale, and UniCredit declined between 1% and 3%.

L'Oreal, Pernod Ricard and Thales advanced between 1% and 2%. 

Mercedes Benz, BMW and Renault added between 0.6% and 1.0%.