European Markets Cautiously Advance Ahead of ECB Rate Decision

Bridgette Randall
22 Jan, 2024
Frankfurt

European markets advanced, and investors debated the rate path and economic outlook in the current year.

Benchmark indexes in Frankfurt, London, and Paris gained, and investors looked ahead to the rate decision from the European Central Bank on Thursday.

In Friday's trading, market indexes in New York jumped more than 1%, and the tech-heavy Nasdaq Composite index soared 1.7% after investors bid up semiconductor and mega-cap tech stocks.

In Monday's trading in Europe, ASML gained 1.5% and Infineon added 1.0%.

Last week, European markets declined between 1% and 2% after the European Central Bank’s policymakers pushed back aggressively against the market's enthusiasm for rate cuts in the near future.

Moreover, Germany, the largest economy in the eurozone, reported that GDP contracted in 2023, keeping the prospect of a recession alive.

However, passenger car registration rose 14% to 10.5 million in 2023 in the European Union despite rising interest rates and consumers avoiding discretionary items amid elevated inflation.

The European Central Bank is widely anticipated to hold rates steady at the end of its policy meeting on Thursday, and policymakers are likely to stress that inflation is too high and that higher rates for longer are still needed to bring down inflation to the target rate of 2%.

 

Europe Indexes and Yields

The DAX index increased 0.5% to 16,634.48, the CAC-40 index rose 0.5% to 7,410.28, and the FTSE 100 index inched up 0.1% to 7,468.16.

The yield on 10-year German bonds edged down to 2.26%; French bonds inched lower to 2.81%; the UK gilts edged lower to 3.89%; and Italian bonds inched lower to 3.84%.

The euro edged lower to $1.089, the British pound inched higher to $1.270, and the U.S. dollar gained to 86.80 Swiss cents.

Brent crude advanced $0.17 to $78.77 a barrel, and the Dutch TTF natural gas decreased by €1.49 to €26.94 per MWh.

 

Europe Stock Movers

Credit Agricole added 0.7% to €13.32 after the French bank said it acquired a minority 7% stake in payment and transaction processing services provider Worldline SA.

The terms of the transaction were not disclosed.

Kindred Group PLC jumped 16.7% to kr121.85 after the online gambling company confirmed it received a takeover proposal from La Francaise des Juex, valuing the company at €2.45 billion.

Bodycote PLC jumped 4.3% to 621.75 pence after the heat treatment and thermal processing company provider said it plans to repurchase up to £60 million of its own shares.

Endeavour Mining PLC decreased 1.7% to 1,360.0 pence, despite the gold mining company estimating 2024 production to increase by 18%.

SDI Group PLC dropped 7.4% to 75.0 pence after its chief executive, Mike Creedon, stepped down on January 19.

Sandoz Group AG gained 1.9% to CHF 28.56 after the Swiss generic and biosimilar medicine maker announced to acquire ranibizumab CIMERLI from Coherus BioSciences, Inc. for an initial payment of $170 million with additional milestone-based payments.

The drug is used to treat macular degeneration in the retina, leading to progressive loss of vision.