European Markets Rebound Supported by Positive Earnings, UK Economy Dips Into Recession

Bridgette Randall
15 Feb, 2024
Frankfurt

European markets traded higher, and investors reviewed the latest batch of corporate results and comments from ECB president Christine Lagarde. 

Benchmark indexes in Paris, Frankfurt, and London advanced after upbeat earnings from Airbus, Commerzbank, Safran, Orange, Renault, and Stellantis. 

Restrictive interest rates and the impact of energy price shocks fade, and inflation in the eurozone is expected to moderate in 2024, ECB President Lagarde said to the committee of the European Parliament. 

Lagarde acknowledges that activities are subdued across a broad spectrum of the economy and labor market conditions are tight, but wage pressures are moderating and energy price inflation is also weakening. 

The European Commission lowered its economic growth outlook for the eurozone by 0.4 percentage points to 0.8%, citing broad weaknesses in activities. 

The commission said all member states are likely to expand in 2024, with Germany at 0.3%, France at 0.9%, and Italy at 0.7%. 

The inflation outlook for the Euro Area was lowered to 2.7% in 2024 and 2.2% in 2025 from 3.2% in 2023. 

 

The UK Economy Dips Into Recession 

The UK economy entered into a technical recession after GDP contracted 0.3% from the previous quarter in the fourth quarter, the Office for National Statistics reported Thursday. 

On an annual basis, the UK economy contracted 0.2% in the fourth quarter of 2023. 

The UK economy contracted in the fourth quarter amid broad weakness in household consumption, net international contribution, services, and industrial production. 

For the full-year 2023, GDP in the UK edged slightly higher by 0.1% after expanding by 4.3% in 2022 and 8.7% in 2021. 

The Bank of England forecasts the UK economy to expand by 0.25% in 2024 and 0.75% in 2025. 

 

Europe Indexes and Yields

The DAX index increased by 0.6% to 17,040.08, the CAC-40 index rose 0.9% to 7,744.96, and the FTSE 100 index inched higher by 0.2% to 7,584.95.

The yield on 10-year German bonds edged down to 2.31%; French bonds inched higher to 2.81%; the UK gilts edged lower to 4.02%; and Italian bonds inched higher to 3.83%.

The euro edged lower to $1.073, the British pound inched higher to $1.255, and the U.S. dollar gained to 88.32 Swiss cents.

Brent crude decreased $0.19 to $81.43 a barrel, and the Dutch TTF natural gas fell by €0.49 to €25.25 per MWh.

 

Europe Stock Movers

Commerzbank surged 3.8% to €10.88 after the German bank said it plans to return about one billion euros to shareholders after the company reported a 55% surge in its annual profit in 2023. 

The financial services company also reported fourth-quarter earnings that were ahead of market expectations. 

Schneider Electric gained 3% to €201.30 after the French company specializing in energy management lifted its dividend and estimated higher earnings and revenue in the current year. 

Renault SA jumped 6.6% to €40.19 after the French automaker and parent of Nissan returned to profitability in 2023 on the back of gains in sales and improvements in margins. 

Stellantis increased 4.3% to €23.61 after the parent company of Italian automaker Fiat announced its plan to buyback its own shares. 

Continental AG increased 0.8% to €76.72, and the German tiremaker announced its plans to eliminate 7,150 jobs worldwide by 2025.