Eurozone Inflation Slowed and Jobless Rate Held Steady, Sweden Leaves Rates Unchanged

Bridgette Randall
01 Feb, 2024
Frankfurt

In cautious trading, stocks in Europe edged slightly lower, but market indexes hovered near record highs.

Benchmark indexes in Frankfurt, Paris, and London traded in a tight range, and investors reviewed the monetary policy decisions in Sweden and the U.S.

The Swedish central bank, Riskbank, maintained its key policy rate at 4.0%, meeting market expectations.

The central bank noted that restrictive rates are having an impact on inflation, but prices are still rising at a faster-than-expected pace. Higher rates are needed to stabilize inflation at lower levels.

The Bank of England is widely expected to hold its key rate at a 16-year high of 5.25%, and the central bank is expected to reiterate its commitment to bringing down inflation to its target level.

The U.S. Federal Reserve held its key lending rate range for the fourth time between 5.25% and 5.50% and clarified that interest rates are not likely to be trimmed in the immediate future, dashing hopes of a rate cut at the end of the next policy meeting in March.

 

Eurozone Inflation Slowed

The Eurozone inflation rate decreased to 2.8% in January from 2.9% in the previous month, Eurostat reported Thursday.

The core rate of inflation, which excludes food and energy prices, slowed to 3.3% and dropped to the lowest level since March 2022.

The decline in overall inflation was driven by the fall in energy inflation to 6.3% from 6.7% in the previous month, and food, alcohol, and tobacco inflation eased to 5.7% from 6.1%.

On a monthly basis, overall consumer prices declined by 0.4% in the month after rising by 0.2% in the previous month.

 

Euro Area Jobless Rate Held Steady

Despite the sharp jump in interest rates and global market uncertainties, the labor market in the Euro Area has remained resilient.

The seasonally adjusted unemployment rate in the Euro Area held steady at 6.4% in December, Eurostat reported in a separate report on Thursday.

The number of individuals seeking jobs decreased by 17,000 to 10.909 million, but the jobless rate varied widely across the region.

The youth jobless rate, tracking applicants younger than 25 years and seeking jobs, decreased to 14.4% from 14.5% in November.

Spain led the jobless rate in the currency union with 11.7%, followed by France with 7.3% and Italy with 7.2%.

Germany reported the lowest jobless rate of 3.1% in the Euro Area.

 

Europe Indexes and Yields

The DAX index decreased 0.3% to 16,850.10, the CAC-40 index fell 0.8% to 7,599.65, and the FTSE 100 index inched higher by 0.4% to 7,658.88.

The yield on 10-year German bonds edged down to 2.20%; French bonds inched higher to 2.70%; the UK gilts edged lower to 3.82%; and Italian bonds inched lower to 3.77%.

The euro edged lower to $1.079, the British pound inched higher to $1.264, and the U.S. dollar gained to 86.31 Swiss cents.

Brent crude decreased $0.61 to $81.16 a barrel, and the Dutch TTF natural gas decreased by €0.30 to €29.98 per MWh.

 

Europe Stock Movers

BNP Paribas declined 8.2% to €57.51 after the French lender reported a decline in pre-tax income in the fourth quarter to €1.47 billion from €2.79 billion a year ago.

Adidas dropped 5.8% to €165.82 after the German sportswear maker's operating earnings guidance fell short of expectations.

Deutsche Bank added 4.4% to €12.56 after the German lender said it plans to increase shareholder payouts by 50% and announced a plan to cut 3,500 jobs.

Sanofi SA declined 2.3% to €91.16 after the global pharmaceutical company headquartered in Paris, France, reported weaker-than-expected fourth-quarter earnings.