Eurozone Faces Technical Recession and Inflation Rebound

Bridgette Randall
10 Jan, 2024
Frankfurt

Benchmark indexes struggled to hold steady after economic growth and resurgent inflation worries dominated trading sentiment.

Market indexes in Frankfurt, Paris, and London traded around the flatline, and investors focused on the latest comments from ECB vice president Luis de Guindos.

Guindos stressed that economic activities are expected to remain weak in the short term in the face of weak export growth and tight financial conditions at home.

Moreover, the eurozone is facing a technical recession in the second half because of a broad-based slowdown driven by weaknesses in construction and manufacturing activities.

Inflation is expected to fall at a slower pace this year than in 2023, added Vice President Luis De Guindos.

"High wage pressures, geopolitical tensions, and upcoming wage negotiations are adding to uncertainty around the future path of inflation," added De Guindos.

 

Italian Retail Sales Advanced In November

Italian retail sales rose 0.4% from the previous month and 1.5% from the previous year in November, the National Institute of Statistics, or ISTAT, reported Wednesday.

Retail sales rose for the second month in a row and matched the growth rate in October.

Food product sales increased by 0.2%, and non-food goods sales advanced by 0.6% in the month.

 

France's Industrial Production Rebounded In November

France's industrial production rose 0.5% from the previous month and 0.6% from a year ago in November, the statistical agency INSEE reported Wednesday.

Volatile industrial production on a monthly basis rose for the first time after falling for three months in a row and falling 0.3% in the previous month.

Mining and energy exploration rebounded to an increase of 1.8% from the decline of 2.7% in the previous month; manufacturing growth rose slightly to 0.3% from 0.2%; and construction activities declined at a slower pace of 1% from 2.2%.

 

Europe Indexes and Yields

The DAX index increased 0.3% to 16,741.54, the CAC-40 index rose 0.2% to 7,442.13, and the FTSE 100 index inched lower by 0.3% to 7,664.76.

The yield on 10-year German bonds edged down to 2.16%; French bonds inched lower to 2.69%; the UK gilts edged down to 3.77%; and Italian bonds decreased to 3.80%.

The euro edged higher to $1.095, the British pound inched higher to $1.275, and the U.S. dollar eased to 85.17 Swiss cents.

Brent crude decreased $0.40 to $77.20 a barrel, and the Dutch TTF natural gas decreased by €0.09 to €30.56 per MWh.

 

Europe Stock Movers

ASML edged up 0.06% to €654.90, and the Dutch chip-making equipment maker was in focus after TSMC, the world's largest chip-making foundry, reported better-than-expected fourth-quarter revenue.

J Sainsbury plc declined by 5% to 290.54 pence after the UK-based grocery company reported weaker-than-expected sales during the holiday period.

Total retail sales, excluding fuel, in the sixteen-week period ending on January 6 rose 6.5%, and in the six-week Christmas holiday period, sales advanced 4.9%.

Grocery sales rose 9.3% and 8.6%, and non-food sales rose 1.5% and decreased 1.3%, excluding the impact of Argos in Ireland, in the sixteen-week and six-week periods, respectively.

Greggs plc rose 6% to 2,623.95 pence after the bakery and convenience food retailer reported strong year-end sales.

Total sales in the financial year 2023 rose 19.6% to £1.8 billion from £1.5 billion, and comparable sales at the company-managed stores rose 13.7% in the year and 9.4% in the fourth quarter.

The company opened a record 220 new stores in the year, with 33 closures and 42 relocations, resulting in a net new 145 stores totaling 2,473 stores at the end of 2023.

Hunting Plc increased 2.4% to 280.50 pence after the precision engineering group reiterated its 2023 outlook and confirmed it is in alignment with market expectations.