European Markets Temper Enthusiasm After Cautious Comments from Policymakers

Bridgette Randall
18 Dec, 2023
Frankfurt

European markets struggled to advance in Monday's trading, and bond yields hovered near 9-month lows in the region.

Benchmark indexes in Frankfurt, Paris, and London edged lower after cautious comments from Fed and ECB policymakers on rate outlooks.

Policymakers ramped up comments to push back market enthusiasm about possible sooner-than-expected rate cuts as early as March 2024 and stressed that inflation is still too high.

European Central Bank Governing Council member and president of Bundesbank Joachim Nagel said Friday that the central bank has probably concluded its hiking stance, but it's still too early to talk about lower borrowing costs.

Members of the European Central Bank, Philip Lane and Isabel Schnabel, as well as Deputy Governor of the Bank of England Ben Broadbent, are anticipated to share their opinions later in the day. 

New York Fed president John C. Williams said talks of rate cuts as early as March seem premature, tempering market bets on imminent rate cuts.

Federal Reserve Bank of Chicago president Austan Goolsbee said in an interview with CBS on Sunday that it is too early to declare victory over inflation and that interest rate decisions would depend on incoming data.

Closer to the region, the Ifo Business Climate indicator for Germany unexpectedly fell to a three-month low of 86.4 in December from the downwardly revised 87.2 in November.

The business mood soured due to the current business conditions and business prospects in the upcoming months.

 

Europe Indexes and Yields

The DAX index decreased 0.2% to 16,719.03, the CAC-40 index eased 0.5% to 7,562.46, and the FTSE 100 index increased 0.4% to 7,605.29.

Bond yields in the eurozone hovered near nine-month lows after the European Central Bank and the Bank of England held their interest rates steady on Thursday.

The yield on 10-year German bonds decreased to 2.01%; French bonds traded lower to 2.54%; the UK gilts eased to 3.64%; and Italian bonds inched lower to 3.71%.

The euro traded higher to $1.092, the British pound inched higher to $1.268, and the U.S. dollar eased to 86.82 Swiss cents.

Brent crude increased $0.01 to $76.56 a barrel, and the Dutch TTF natural gas increased by €0.11 to €33.30 per MWh.

 

Europe Stock Movers

Vodafone Group plc increased 6.4% to 68.88 pence after the iliad Group proposed to merge its Italian business with Vodafone Italia.

The proposal valued Vodafone Italia at €10.45 billion, and Vodafone would obtain 50% of the share capital of NewCo, together with a €6.5 billion cash payment and a €2.0 billion shareholder loan to ensure long-term alignment.

The proposal valued Iliad Italia at €4.45 billion. Iliad would obtain 50% of the share capital of NewCo, together with a €500 million cash payment and a €2.0 billion shareholder loan.

Vodafone’s equity in NewCo at closing was valued at €1.95 billion.

Iliad said that the current proposal values the company at 7.8 times operating earnings, higher than the 7.1 times previously proposed in February 2022.

CRH plc declined 0.5% to 5,280.0 pence after the company partnered with Barro Group to acquire Australian cement manufacturing company Adbri.

The proposal values the Australian company at A$2.1 billion, a 41% premium from the previous closing price.

Barro Group and its associates currently own 42.7% of the company.

Unilever plc decreased 0.08% to 3,752.50 pence after the consumer products company said it agreed to sell its Q-Tips maker Elida Beauty for an undisclosed amount to Boston-based private equity firm Yellow Wood.

Thyssenkrupp Nucera gained 2.4% to €16.40 after the company swung in the fiscal fourth quarter to a net income of €4.3 million compared to a loss of €1.2 million in the previous year.

Software AG added 1.2% to €32.32 after IBM agreed to acquire the company's enterprise tech business for €2.13 billion in cash.