European Markets Rested, Swedish GDP Contracted

Bridgette Randall
29 Jan, 2024
Frankfurt

European markets advanced in Monday's trading as investors prepared for monetary policy decisions from central banks in the U.S. and the U.K.

Market indexes in Frankfurt, Paris, and London traded around the flatline as earnings season enters the third week.

Investors are also awaiting the release of interest rate decisions from the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.

Both central banks are widely anticipated to hold rates steady and reiterate their commitment to keep interest rates restrictive to bring inflation down to the target level of 2%.

On Thursday, the European Central Bank left its key lending rates unrevised and signaled that interest rates will remain restrictive as long as necessary, without giving any clarity if and when rates may be cut.

Moreover, investors also reviewed the faster-than-expected economic growth in the U.S. in the fourth quarter while inflation slowed.

In Friday's trading, market indexes in New York lacked direction after an alternative measure of inflation showed a decline in December.

Core Personal Consumption Expenditure, which excludes food and energy, rose to 0.2% from 0.1% on a monthly basis, and the annual core rate fell to 2.9% from 3.2%, the lowest level since March 2021.

Closer to home, fourth quarter GDP rates for the Euro Area, Germany, France, Spain, and Italy are awaited by investors later in the week.  

In addition, inflation figures from the Euro Area, Spain, France, and Germany are scheduled to be released this week.

 

Sweden's GDP Contracted In 2023

The Swedish economy expanded by 0.1% in the three months to December 2023, while reversing a 0.3% contraction in the previous quarter, according to a preliminary estimate released by Statistics Sweden on Monday.

Compared to the same period last year, the economy stagnated after shrinking by 0.8% in the second quarter and 0.3% in the third quarter.

For the whole year, the GDP shrank by 0.3%, the statistical agency noted.

“The last three months of 2023 saw relatively minor movements in overall economic activity, with weaker figures for domestic use weighed up by a strengthening of net exports,” highlighted Mattias Kain Wyatt, an economist at Statistics Sweden.

 

Europe Indexes and Yields

The DAX index decreased 0.5% to 16,874.0, the CAC-40 index rose 0.01% to 7,634.92, and the FTSE 100 index inched higher by 0.1% to 7,642.72.

The yield on 10-year German bonds edged down to 2.23%; French bonds inched lower to 2.72%; the UK gilts edged lower to 3.91%; and Italian bonds inched lower to 3.75%.

The euro edged lower to $1.082, the British pound inched higher to $1.272, and the U.S. dollar gained to 86.20 Swiss cents.

Brent crude decreased $0.23 to $82.72 a barrel, and the Dutch TTF natural gas increased by €0.59 to €28.67 per MWh.

 

Europe Stock Movers

Ryanair Holdings declined 1.8% to €18.17 after the deep discount airline trimmed its profit estimate for the fiscal year ending in March.

Holcim AG increased 3.2% to CHF 66.18 after a Swiss construction material company announced plans to spin off its North American business through a listing in New York.

The North American operation generated $11 billion in revenue and earnings before interest and taxes of $2 billion in 2023.

Post-spinoff, Holcim revenue in 2023 is estimated at $17 billion, with $2 billion of free cash flow.

Ferrexpo decreased 3.1% to 83.19 pence after a court of appeals in Ukraine affirmed claims of $125 million against the iron ore pellet producer.

Philips NV plunged 6.5% to €19.70 after the Dutch medical device maker said it would halt new sales of sleep machines following a series of recalls.

Group sales in fiscal year 2023 increased 7% to €18.2 billion in 2023 and advanced 3% to €5.1 billion in the fourth quarter.

Income from operations swung to a loss of €115 million in 2023 and a profit of €24 million in the fourth quarter, including charges of €363 million connected with the Respironics consent decree.

The company reached a settlement with the U.S. Food and Drug Administration regarding a mass recall of its Respironics ventilators.

The medical device maker retained its 85-cent stock dividend for shareholders.

Philips expects to deliver 3% to 5% comparable sales growth and an adjusted EBITA margin of 11% to 11.5% in 2024.

Wacker Chemie declined 1.1% to €99.34 after the chemical company reported a 60% decline in its core earnings in 2023.

Bayer AG declined 4.5% to €30.76 after the company was ordered to pay $2.25 billion by a Pennsylvania court to a plaintiff who developed cancer due to exposure to the company's Roundup weed killer.

The company plans to appeal the decision.

Eutelsat Communications SA dropped 14.6% to €3.51 after the company lowered its annual revenue outlook.

The company revised its fiscal 2024 revenue in a range of €1.25 billion to €1.3 billion from its previous estimated range of €1.32 billion to €1.42 billion.

The company lowered its adjusted EBITDA in a range of €650 million to €680 million from its previous range between €725 million and €825 million.

The company attributed the revenue shortfall to the delay in ground network construction and the shift in revenue mix towards the sale of user terminals with lower margins.