Eurozone Bank Lending Growth Weakened, German Business Climate Index Improved

Bridgette Randall
27 Mar, 2023
Frankfurt

European market indexes advanced after the U.S. bank worries eased and investors shifted focus to domestic economic and corporate news. 

Stocks traded  higher after Germany's business confidence unexpectedly improved and investors overlooked slowing credit growth. 

With the full effect of higher interest rates still not felt by the economy, economic slowdown may be approaching faster than previously expected. 

On Monday, investors focused on the receding banking worries and rising confidence in the German business community. 

 

Eurozone Private Lending Growth Slowed In February 

Eurozone private lending rose at the slowest pace in February, reflecting higher interest rates and weak credit demand, the European Central Bank reported Monday. 

Private sector lending increase slowed to an annual growth rate of 3.3% in February from 3.8% in January. 

M1 money supply, which includes currency in circulation and overnight deposits, declined 2.7% in February, a faster pace than the decrease of 0.8% in January. 

M3 money supply, a wider measure of money in circulation, rose at a slower annual pace of 2.9% from 3.5% in January. 

 

German Business Climate Index Improved In March 

The business climate index increased to 93.3 in March from 91.1 in February, the Ifo Institute reported Monday. 

The index increased for the fifth month in a row after current situation and expectations indexes improved. 

The current situation indicator increased more-than-expected to 95.4 in March from 93.9 in the previous month and the expectations index increased to 91.2 from 88.4 respectively. 

"Despite turbulence at some international banks, the German economy is stabilizing." said Clemens Fuest, president of the ifo Institute. 

In manufacturing, the index rose substantially and companies were more satisfied with their current business situation. Moreover, pessimism almost completely disappeared from their expectations.

 Sentiment improved considerably, especially  in key areas of manufacturing such as the automotive, chemical, electrical and electronics, and machinery and equipment  industries. 

 

Europe Indexes & Yields 

The DAX index increased 1.1% to 15,127.68, the CAC-40 index added 0.9% to 7,078.27 and the FTSE 100 index advanced 0.9% to 7,471.77. 

The yield on 10-year German Bunds edged higher to 2.26%, French bonds rose to 2.76% and the UK gilts to 3.38% and Italian bonds to 4.08%. 

The euro edged up to $1.078, the British pound inched higher $1.22 and the Swiss franc to 91.63 cents. 

Brent crude oil added $2.98 to $77.98 a barrel and the Dutch TTF natural gas price rose Є1.42 to Є42.53 a MWh. 

 

Europe Movers

Deutsche Bank AG increased 6.2% to €9.07 after German Chancellor Olaf Scholz rejected comparison with Credit Suisse and said that Germany's largest bank is "profitable" and there is no "reason to be concerned."

The comments lifted stocks of other peers in the region. 

Commerzbank, BNP Paribas, Barclays and UniCredit jumped between 1% and 3%.  

Salzgitter AG soared 6.9% to €33.54 after the steelmaker forecasted better-than-expected profit in 2023. 

Novartis AG advanced 8.4% to $90.55 after the Swiss drug maker reported positive results for its breast cancer trial drug Kisqali. 

"The Independent Data Monitoring Committee recommended stopping the trial early as the primary endpoint of invasive disease-free survival has been met," the company said in a statement released to investors.