European Markets Edged Higher, Eurozone Business Activities Fall

Bridgette Randall
24 Jan, 2024
Frankfurt

European markets advanced after investors digested a fresh batch of corporate earnings, the business activities report, and Beijing's latest stimulus measures.

Market indexes in Paris, London, and Frankfurt gained in cautious trading amid a flood of corporate earnings reports.

The semiconductor equipment maker ASML reported a higher-than-expected fourth quarter report, SAP estimated a double-digit increase in its cloud computing segment, and Siemens Energy's preliminary quarterly results were ahead of market expectations.

French train maker Alstom reported new orders that exceeded market expectations, but the company missed its quarterly sales outlook.

 

Private Sector Activities Remain Subdued in the Eurozone

On the economic front, eurozone business activities continued to decline at the beginning of the year, S&P Global reported in its monthly survey on Wednesday.

The HCOB Eurozone PMI Composite Index edged slightly higher to 47.9 in January from 47.6 in December.

The latest data suggested that business activities in the currency zone dropped for the eighth month in a row, but at the slowest pace since last July.

The pace of new incoming orders continued to decline, and the fall in export order growth eased to the slowest pace in nine months, with order backlogs falling sharply.

However, the German private sector contracted at a faster pace in January amid ongoing broad weakness.

The HCOB German PMI Composite Index decreased to 47.1 in January from 47.4 in December.

On the other hand, the UK's private sector activity gained momentum in January, and the S&P Global UK Composite PMI rose to 52.5 in January from 52.1 in December.

 

China Injects Liquidity

In other economic news, the People's Bank of China lowered its bank reserve requirement ratio, or RRR, by 50 basis points to support flagging financial markets and inject liquidity into the financial system.

The central bank lowered its reserve requirement for the first time after cutting it by 25 basis points in September, and the latest cut is expected to add about 1 trillion yuan, or $140 billion, to the financial system.

 

Europe Indexes and Yields

The DAX index increased 1.0% to 16,792.86, the CAC-40 index rose 0.5% to 7,425.52, and the FTSE 100 index inched higher by 0.3% to 7,503.08.

The yield on 10-year German bonds edged up to 2.31%; French bonds inched higher to 2.81%; the UK gilts edged higher to 4.01%; and Italian bonds inched lower to 3.86%.

The euro edged lower to $1.090, the British pound inched higher to $1.276, and the U.S. dollar gained to 86.52 Swiss cents.

Brent crude increased $0.39 to $79.94 a barrel, and the Dutch TTF natural gas increased by €0.77 to €28.0 per MWh.

 

Europe Stock Movers

Alstom SA decreased 5.5% to €11.27 after the French train and mobility solutions provider reported weaker-than-expected fiscal third quarter sales.

SAP SE soared 6% to €158.28 after the German information system company reported fourth-quarter results.

Revenue in the fourth quarter rose 5% to €8.5 billion from €8.0 billion, net profit soared to 1.2 billion from 326 million, and diluted earnings per share rose to €1.01 from 46 cents a year ago.

The company estimated 2024 cloud segment revenue between €17.0 billion and €17.3 billion, an increase between 24% and 27% in constant currencies.

The company said its restructuring, which will involve about 8,000 employees, is likely to cost €2 billion in 2024.

Fresnillo Plc advanced 5.5% to 505.0 pence after the precious metal mining company said silver production rose in 2023.

Siemens Energy increased 7.5% to €13.35 after the company reported better-than-expected fiscal first quarter results.

Tullow Oil advanced 5.1% to 31.74 pence after the company said its 2023 energy production is expected to exceed its previous estimate.

ASML Holding increased 6.3% to €751.80 after the Dutch semiconductor equipment maker reported fourth-quarter earnings ahead of market expectations.

Revenue in the quarter ending in December increased to €7.2 billion from €6.4 billion, net income advanced to €2.0 billion from €1.8 billion, and diluted earnings per share rose to €5.20 from €4.60 a year ago.