European Markets Turn Lower After Rate Cut Hopes Fade, UK Wage Growth Slowed

Bridgette Randall
16 Jan, 2024
Frankfurt

European markets declined after investors scaled back hopes of rate cuts in the near future.

Benchmark indexes in Frankfurt, Paris, and London traded down amid growing worries of a wider war in the Middle East, fading hopes of rate cuts, and persistent economic growth worries.

European policymakers drummed up their campaign against rate-cut hopes, and French central bank Governor Francois Villeroy de Galhau said it is too early to declare victory over inflation.

ECB policymaker Joachim Nagel said it was too early to discuss rate cuts, emphasizing that inflation remains too high, while delivering his prepared remarks at a gathering in Davos. Switzerland.

But the central bank's next move is likely to cut rates at some point this year, Villeroy de Galhau added during his comments delivered in Davos.

Yesterday, Austria's central bank governor, Robert Holzmann, said investors should not count on the European Central Bank cutting rates at all this year.

Investors reviewed the latest update on German inflation and UK wage growth.

 

Germany's December Inflation Rate Confirmed

Germany's consumer price inflation accelerated to 3.7% in December from 3.2% in November, the Federal Statistics Office, or Destatis, confirmed Tuesday the preliminary estimate released on January 4.

 

UK Wage Growth Slowed

Regular pay for UK wage earners increased 6.6% from a year ago in three months to November, the Office for National Statistics reported Tuesday.

The increase in wages, excluding bonuses, slowed from the downwardly revised 7.2% in the previous three-month period.

Wages, including bonuses, rose 6.5% in the three months to November.

The unemployment rate held steady at 4.2%, matching the rate in the previous three-month period.

 

Europe Indexes and Yields

The DAX index decreased 0.6% to 16,515.75, the CAC-40 index fell 0.5% to 7,376.57, and the FTSE 100 index inched lower by 0.6% to 7,552.54.

The yield on 10-year German bonds edged up to 2.18%; French bonds inched higher to 2.76%; the UK gilts decreased slightly to 3.78%; and Italian bonds increased to 3.80%.

The euro edged lower to $1.08, the British pound inched lower to $1.267, and the U.S. dollar eased to 86.04 Swiss cents.

Brent crude advanced $0.78 to $78.90 a barrel, and the Dutch TTF natural gas decreased by €0.26 to €29.67 per MWh.

 

Europe Stock Movers

Energy and mining companies traded mixed after crude oil and metal prices turned higher in volatile trading.

BP plc rose 0.4% to 454.05 pence, and Shell plc decreased 0.5% to 2,447.90 pence.

Glencore PLC dropped 0.8% to 441.30 pence, Anglo American increased 0.3% to 1,830.40 pence, and Antofagasta decreased 0.4% to 1,617.0 pence.

Banks headed lower after European policymakers pushed back against the timing of rate cuts this year.

Deutsche Bank declined 1.2% to €11.79, Banco Santander declined 1.7% to €3.70, and UniCredit fell 0.6% to €25.46.