European Markets Hover Near Recent Highs, Brent Oil Price Drops Below $80

Bridgette Randall
28 Dec, 2023
Frankfurt

European markets witnessed marginal losses in thin trading, and the euro edged higher against the U.S. dollar.

Benchmark indexes traded near recent highs as investors supported the bets for rate cuts by major central banks in the U.S. and Europe early next year.

The Federal Reserve has indicated the possibility of rate cuts in 2024, but the European Central Bank has pushed back, citing elevated and persistent inflation.

Despite policymakers at the European Central Bank indicating the need for higher rates for longer, investors have been bidding up stocks in the hope that the steady decline in inflation over the last nine months may convince central bankers to cut rates earlier than expected.

The euro and the pound continued to edge higher against the U.S. dollar, and both currencies traded at five-month highs.

The DAX index is up 19%, and the CAC 40 index has gained 14.7% in the year so far, despite the sluggish economic outlook and elevated inflation across the currency union and in the U.K.

 

Europe Indexes and Yields

The DAX index decreased 0.2% to 16,714.39, the CAC-40 index declined 0.2% to 7,562.36, and the FTSE 100 index inched lower by 0.07% to 7,718.97.

The yield on 10-year German bonds decreased to 1.92%; French bonds inched lower to 2.44%; the UK gilts inched lower to 3.48%; and Italian bonds inched higher to 3.52%.

The euro traded higher to $1.11, the British pound inched higher to $1.28, and the U.S. dollar eased to 83.49 Swiss cents.

Crude oil prices declined for the second day in a row and extended the 2-day loss to 2.5% after U.S. oil inventories rose more than expected to 1.84 million barrels last week, the largest increase in five weeks.

Moreover, U.S.-led maritime patrolling also facilitated the return of major oil companies to Red Sea shipping lanes.

Brent crude decreased $0.20 to $79.34 a barrel, and the Dutch TTF natural gas decreased by €1.92 to €33.60 per MWh.

 

Europe Stock Movers

Banks, financial services, and automakers struggled in the final week of trading.

Renault, Mercedes-Benz, Volkswagen, and Stellantis declined between 0.1% and 0.7%.

UniCredit, Deutsche Bank, Banco Santander, Societe Generale, and Barclays Bank declined between 0.2% and 0.6%.

Energy companies declined after Brent crude oil prices eased below $80 a barrel and leading shipping companies returned to the Red Sea shipping lanes despite the elevated tensions in the Middle East.

BP Plc declined 0.3% to 465.83 pence, Shell Plc decreased 0.3% to 2,548.0 pence, TotalEnergies dropped 1.3% to €61.64, and Repsol SA eased 1.4% to €13.61.

Mining companies lacked direction in thin trading, and base metal prices showed little movement on the persistent demand growth worries in China.

Glencore, Antofagasta, and Anglo American traded sideways in a tight trading range.

Vestas Wind System rose 1.8% to DKK 213.85 and extended gains for the sixth session in a row after the company won an order to supply 1.1 GW of wind turbines in the United States.

Skanska AB jumped 0.4% to SEK 183.40 after the company won a $147 million contract from the U.S. Navy for the National Oceanic and Atmospheric Administration.