Eurozone Economy Stalled In Fourth Quarter, Germany and France GDP Growth Slows In 2023

Bridgette Randall
30 Jan, 2024
Frankfurt

 European market indexes inched higher in record territory as investors digested a fresh batch of corporate results.

The Euro Area barely avoided a technical recession after stalling in the fourth quarter of 2023 as consumer spending remained restrained amid elevated interest rates and high inflation.

Market indexes in Frankfurt and Paris jumped to new record highs, and the benchmark index in London edged higher in Tuesday's trading.

 

The Euro Area Barely Avoids Recession

The Euro Area economy struggled in the final quarter of 2023 after larger member nations showed little growth, the statistical agency Eurostat reported Tuesday.

The eurozone GDP in the December quarter stalled following a 0.1% contraction, narrowly avoiding a technical recession in the currency union.

The economies of Spain expanded by 0.6%, Portugal by 0.8%, Italy by 0.2%, and Belgium by 0.4%.

However, the economy of Spain stalled, and Germany contracted by 0.3%.

In full-year 2023, the eurozone economy expanded by 0.5%, despite the aggressive rate hike campaign and multi-year high inflation.

 

Spain's Inflation Accelerated

Spain's overall inflation unexpectedly accelerated in January, the National Statistics Institute reported Tuesday.

Inflation increased to an annual pace of 3.4% in January from 3.1% in the previous month, driven by a higher rate of electricity.

On a monthly basis, Spain's consumer price index edged up 0.1%.

The core rate of inflation, which excludes food and energy, eased for the sixth month in a row to 3.6% from 3.8% in the previous month and fell to the lowest level since March 2022.

Spain's EU harmonized annual inflation rate edged higher to 3.5% from 3.3% in each of the previous two months.

 

Europe Indexes and Yields

The DAX index increased 0.1% to 16,962.54, the CAC-40 index rose 0.3% to 7,665.48, and the FTSE 100 index inched higher by 0.6% to 7,674.69.

The yield on 10-year German bonds edged down to 2.24%; French bonds inched higher to 2.74%; the UK gilts edged lower to 3.87%; and Italian bonds inched lower to 3.75%.

The euro edged lower to $1.082, the British pound inched higher to $1.268, and the U.S. dollar gained to 86.30 Swiss cents.

Brent crude increased $0.21 to $82.04 a barrel, and the Dutch TTF natural gas increased by €0.06 to €28.23 per MWh.

 

Europe Stock Movers

BBVA increased 4.1% to €8.45 after the Spanish financial services provider posted strong fourth-quarter results and announced a stock repurchase plan of €781 million.

Hapag Lloyd declined 8.4% to €141.70 after the German shipping company's operating earnings declined 92% in the fourth quarter because of a lower freight rate reflecting the normalization of global supply chains from pandemic-era disruptions.

Diageo plc declined 3.5% to 2,749.0 pence after sales in the first half declined and profit fell by more than 10% after demand for expensive spirits eased in Latin America and the Caribbean region.

WPP PLC jumped 1.5% to 792.24 pence after the advertising agency upgraded its medium-term financial targets.