European Stock Markets Halted 8-week Rally, Eurozone Inflation Accelerated

Bridgette Randall
05 Jan, 2024
Frankfurt

European markets struggled and extended weekly losses after rising for eight weeks in a row.

Worries about the rate path, lackluster economic data, and stretched consumer finances dominated market sentiment in Friday's trading.

Benchmark indexes in Frankfurt are set to close down 1.7%, in Paris by 2.7%, and in London by 0.9%. 

Market indexes have struggled to hold ground in the new year after rising steadily in the previous two months on growing optimism that the major central banks are ready to cut interest rates in early 2024.

That sentiment was reversed in the first week of trading in the new year, after the release of the Federal Reserve's December meeting minutes. 

Moreover, reports suggested the resilience of the U.S. labor market after weekly jobless claims declined and the private sector added more-than-expected jobs in December, further denting the enthusiasm for rate cuts.

 

Eurozone Inflation Accelerated In December

The eurozone inflation rate accelerated to 2.9% from a year ago in December, Eurostat reported Friday.

The inflation picked up from 2.4% in the previous month, when it dropped to a two-year low because of the base effect.

Core inflation, which excludes food and energy prices, eased to 3.4% from 3.6% and dropped to the lowest level since March 2022.

 

Germany's Retail Sales Declined In December 

Seasonally adjusted retail sales in Germany declined 2.4% from a year ago in December, the Federal Statistics Office, or Destatis, reported Friday.

Retail sales declined 2.5% from the previous month and fell the most since April 2022, reversing the 1.1% increase in October.

Sales of non-food items adjusted for inflation declined by 3.6%, and online and direct sales eased by 2.8%.

In contrast, the real retail trade in textiles, clothing, shoes, and leather goods increased by 2.0% compared to the previous month and by 2.6% compared to the same month last year.

The effect of higher prices was evident in food retail sales, and food sales dropped steadily in 2023 and fell to the level last seen in 2015 as consumers focused on the basics and avoided fancy items.

Real food retail sales declined 0.5% in the month and dropped 0.1% unadjusted for price.

Sales declined 3.3% in the first eleven months.

 

UK Home  Prices Rebounded In December

UK home prices rebounded after seven months of decline as buyers searched for bargains and tackled elevated mortgage rates.

The price increase still reflected the home shortages rather than the growing demand from buyers.

The Halifax House Price Index increased by 1.7%, or £4,800, from a year ago in December, Halifax and the Bank of Scotland said in a report released Friday.

On a monthly basis, home prices rose 1.1% from the previous month and increased for the third month in a row.

The average home price increased by 1.1%, or £3,060, from the previous month to £287,105.

Across the UK in 2023, Northern Ireland recorded the largest price increase of 4.1% to £192,153. Scotland with 2.6% to £205,170.

However, the average home prices in the South East fell sharply by 4.5%, or £17,755 to £376,804.

 

Europe Indexes and Yields

The DAX index decreased 0.8% to 16,492.03, the CAC-40 index fell 1.1% to 7,369.63, and the FTSE 100 index inched lower by 0.9% to 7,655.02.

The yield on 10-year German bonds decreased to 2.16%; French bonds inched higher to 2.70%; the UK gilts edged up to 3.79%; and Italian bonds advanced to 3.85%.

The euro edged lower to $1.090, the British pound inched lower to $1.265, and the U.S. dollar eased to 85.35 Swiss cents.

Brent crude increased $0.54 to $78.15 a barrel, and the Dutch TTF natural gas increased by €0.50 to €33.91 per MWh.

 

Europe Stock Movers

Revolution Bars Group plunged 21.7% to 4.26 pence after the company said it would close its facilities located in Derby, Reading, St Peters, Liverpool, and Wilmslow.

Endeavour Mining declined 11.3% to 1,503.0 pence after the company removed chief executive Sebastien de Montessus with immediate effect.

The company said its board is investigating misappropriation of $5.9 million and allegations of personal misconduct with colleagues.

The Board has appointed Ian Cockerill, Deputy Chairman of the Board, as Chief Executive Officer and Executive Director with immediate effect.

Clarkson PLC increased 7% to 3,495.10 pence after the integrated shipping service provider said full-year pre-tax earnings are likely to be ahead of market expectations.

Sodexo SA decreased 0.3% to €101.95 after the French food and facilities management company said fiscal first-quarter sales increased 3.1% and the company reiterated its outlook for fiscal 2024 and 2025.