Subdued Trading In Europe, ECB Rate Action Awaited

Bridgette Randall
23 Jan, 2024
Frankfurt

European markets lacked direction, and investors debated the rate path and the prospect of economic growth and cooler inflation amid global economic uncertainties and elevated geopolitical tensions.

Market indexes in Frankfurt, London, and Paris trade around the flat line, and investors are worried that the European Central Bank may keep higher rates for longer and dash hopes of rate cuts later in the year.

Policymakers are set to announce rate decisions and monetary policy direction on Thursday, and investors are hoping to get more insights about the future rate path.

In Asia, the Bank of Japan held its short-term interest rate at -0.1% and kept the yield around zero on 10-year Japanese government bonds.

The central bank also lowered its 2024 inflation outlook to 2.4% from its previous estimate of 2.8% released in October.

Market indexes in Shanghai and Hong Kong advanced, and the yuan jumped to 7.18 against the U.S. dollar after China's cabinet pledged to take more "forceful" measures to stabilize financial markets.

 

UK Public Sector Borrowing Declined In December

The UK public sector borrowing fell sharply in December from a year ago and dropped to the lowest level since 2019, the Office for National Statistics reported Tuesday.

Public sector borrowing, excluding public sector banks, dropped to £7.8 billion from £16.2 billion in December.

Total public sector receipts increased 5.9% to £89.5 billion because of higher collection of VAT and income tax, and spending declined 3.4% to £97.3 billion, driven down in part by lower interest payments.

Total borrowing in the nine-month period to December of the current financial year rose by £11.1 billion to £119.1 billion, the fourth highest borrowing in the period on record.

 

Europe Indexes and Yields

The DAX index decreased 0.07% to 16,670.45, the CAC-40 index fell 0.2% to 7,401.76, and the FTSE 100 index inched down 0.2% to 7,475.41.

The yield on 10-year German bonds edged up to 2.30%; French bonds inched lower to 2.80%; the UK gilts edged higher to 3.93%; and Italian bonds inched higher to 3.87%.

The euro edged lower to $1.088, the British pound inched higher to $1.272, and the U.S. dollar gained to 86.81 Swiss cents.

Brent crude decreased $0.56 to $79.47 a barrel, and the Dutch TTF natural gas increased by €0.53 to €27.79 per MWh.

 

Europe Stock Movers

Marston's PLC declined 0.2% to 33.25 pence, despite the pub house operator reporting a solid holiday sales increase.

Associated British Foods increased 1.4% to 2,300.0 pence after the company announced its trading update for 16 weeks ending on January 6. 

The company said its discount apparel store chain, Primark, benefited from cash-strapped consumers looking for discounts, but added underlying sales growth slowed in the last  quarter.  

L. M. Ericsson declined a fraction to kr61.26 in Stockholm trading after the telecom equipment maker said challenging market conditions are likely to persist in 2024.

Sanofi SA declined 1.7% to €92.63 after the French pharmaceutical company agreed to acquire the U.S. biotech company Inhibrx Inc. for as much as $2.2 billion.

Inhibrx shareholders will receive $30 in cash for each share held, a contingent value right of $5.0, and 0.25 shares of a new publicly traded company that will retain Inhibrx’s non-INBRX-101 assets, the immuno-oncology drug pipeline.

Sanofi will retain an 8% stake in the new Inhibrx.