UK Inflation Dropped to 26-month Low, German Consumer Climate Indicator Improved

Bridgette Randall
20 Dec, 2023
Frankfurt

European market indexes diverged, and investors digested the latest comments from central bankers.

Market indexes in Paris and Frankfurt declined but rose in London as investors reviewed another batch of economic releases.

The producer price index in Germany declined for the fifth month in a row and fell 7.9% in November, Destatis reported on Wednesday.

The producer price index decline was largely driven by the fall in energy prices from a high base in the previous year, and the decline was smaller than the 11.0% decline in October.

 

The German Consumer Climate Index Shows Improvement

Germany's consumer sentiment is expected to improve in January, according to a survey conducted by the market research firms GfK and Nuremberg Institute for Market Decisions.

The GfK Consumer Climate indicator for January 2024 rose to -25.1 from -27.6 in December, the highest since August, driven by higher income expectations and a desire to spend.

“It remains to be seen whether the current increase represents the beginning of a sustained recovery in consumer sentiment,” explains Rolf Bürkl, consumer expert at NIM.

 

UK Consumer Price Inflation Slows 

The consumer price index declined to 3.9% in November from 4.6% in October, the Office for National Statistics reported Wednesday.

The inflation index declined to the lowest since September 2021.

The inflation pressures eased in transportation services, including air fares, used cars, recreation and cultural gathering admissions, and live music events.

Food and non-alcoholic beverage price inflation eased to 9.1% from 10.1%, but the cost of housing and utilities fell at a slower pace of 3.4% from 3.5% in the previous month.

Restaurants and hotels price inflation held steady at 7.5%, communication services inflation at 8.1%, and education at 4.5%.

Core inflation, which excludes food and energy prices, eased to 5.1% from 5.7% in October and dropped to the lowest since January 2022.

 

Europe Indexes and Yields

The DAX index decreased 0.08% to 16,736.24, the CAC-40 index inched down 0.04% to 7,572.68, and the FTSE 100 index increased 0.8% to 7,696.15.

The yield on 10-year German bonds decreased to 1.98%; French bonds inched lower to 2.50%; the UK gilts inched lower to 3.56%; and Italian bonds inched lower to 3.62%.

The euro traded higher to $1.095, the British pound inched higher to $1.265, and the U.S. dollar eased to 86.20 Swiss cents.

Brent crude decreased $1.26 to $80.25 a barrel, and the Dutch TTF natural gas decreased by €1.24 to €33.94 per MWh.

 

Europe Stock Movers

Energy stocks traded higher after crude oil prices rebounded more than 1.5% on supply disruptions and rising tensions in the Red Sea.

BP plc gained 0.8% to 467.45 pence, Shell plc advanced 1% to 2,568.0, TotalEnergies SE added 0.2% to €62.11, and Repsol increased 0.1% to €13.58.

Petrofac Ltd. soared 34.2% to 30.10 pence after the energy industry service provider won a $1.4 billion multi-year contract from TenneT to expand the Dutch-German transmission system operator's offshore wind capacity in the North Sea.

Telefonica rose 3.7% to €3.70 after the Spanish government said it plans to buy as much as a 10% stake in the telecom operator.

The government announced its plan after the Saudi Telecom Company revealed a 9.9% stake in the company in September.

Spain considers Telefonica a defense service provider, giving a veto power to the Defense Ministry over who owns and controls shares in the company over 5%, unless the stockholders give up rights to have a board seat.

Indivior PLC rose 2.8% to 1,179.0 pence after the company settled its patent dispute with Actavis Laboratories, a subsidiary of Israel-based Teva Pharmaceuticals.

Teva Pharmaceuticals advanced 0.9% to €9.48 in Paris trading.

Aurubis AG decreased 0.6% to €77.04 after the German copper company confirmed a 38% plunge in its earnings in the fiscal 2023 period ending in September.

Revenue in the fiscal year declined 8.8% to €17.0 billion from €18.5 billion, consolidated net income dropped 38% to €268 million from €433 million, and diluted earnings per share fell to €6.13 from €9.91 a year ago.

Deutsche Post AG decreased 1.4% to €45.10 after the U.S.-based FedEx lowered its full-year revenue outlook, citing macroeconomic challenges.