European Markets Extended Weekly Gains, Germany's Economy Contracted In Fourth Quarter

Bridgette Randall
23 Feb, 2024
Frankfurt

European markets struggled to advance on the final day of the week as investors debated the future rate path and reacted to domestic corporate results. 

Benchmark indexes in Germany and France hovered near the new record highs, and the index in the UK lacked direction. 

In other economic news in the region, the Hungarian jobless rate increased to 4.6% in the three-month period ending in January from 4.4% in the three-month period ending in December, the statistical office reported Friday. 

UK consumer confidence eased in February on weak economic conditions, the GfK survey indicated on Friday. 

The consumer sentiment index decreased to -21 in February from -19 in January, and four of the five components of the index registered a decline in the month. 

 

Germany's Q4 Economic Contraction Confirmed

Germany's fourth-quarter GDP declined 0.3% from the previous quarter after stagnating in the third quarter, confirmed Destatis in its second review released Friday. 

The statistical office confirmed the data released on January 30. 

The weakness in capital investment kept the overall economic growth in check after consumer spending rose by 0.2% and government spending advanced by 0.3%. 

For all of 2023, GDP contracted by 0.3% or fell 0.1% when adjusted for calendar from the previous year, as estimated in the preliminary estimate released at the end of January. 

Labor participation rose to 46.2 million in Germany,  an increase of 216,000 or 0.5% from the previous year. 

However, 0.5% fewer working hours were worked per employed person than i the fourth quarter of 2022, due to one fewer working day in the calendar year from the previous year, the Institute for Labor Market and Occupational Research of the Federal Employment Agency reported Friday. 

 

German Business Morale Stayed Near Pre-war Low

The Ifo Business Climate Index improved to 85.5 in February from 85.2 in January, when it reached a three-and-a-half-year low. 

High interest rates, weak consumer spending, and geopolitical uncertainties weighed on the sentiment of business owners, and their assessment of the current business situation stayed at the lowest level since July 2020. 

 

Europe Indexes and Yields

The DAX index increased by 0.04% to 17,375.48, the CAC-40 index rose 0.2% to 7,928.72, and the FTSE 100 index inched higher by 0.1% to 7,689.65.

For the week, the DAX increased 1.7%, the CAC-40 index advanced 2.6%, and the FTSE 100 index decreased 0.4%. 

The yield on 10-year German bonds edged up to 2.46%; French bonds inched higher to 2.93%; the UK gilts edged higher to 4.13%; and Italian bonds inched higher to 3.95%.

The euro edged higher to $1.082, the British pound inched higher to $1.265, and the U.S. dollar gained to 88.15 Swiss cents.

The natural gas price in Europe dropped 8% this week and approached the pre-Ukraine war crisis level of May 2021. 

Brent crude increased $1.02 to $82.51 a barrel, and the Dutch TTF natural gas declined by €0.58 to €22.61 per MWh.

 

Europe Stock Movers

Standard Chartered rose 7.7% to 652.0 pence after the UK-based and emerging-markets-focused bank announced a $1 billion stock buyback program. 

The bank said annual profit in 2023 increased 18% to $3.47 billion from $2.95 billion a year ago. 

Credit impairment charges related to its exposure to China's commercial real estate sector declined to $282 million from $582 million in 2022, suggesting that the overall picture may be less gloomy than expected. 

Still, the bank has taken about $1.2 billion in charges related to its exposure to China's commercial property sector. 

The bank's net interest margin increased to 1.67% in 2023 from 1.41% in 2022, and the wider net margin increased net interest income by 23% to $9.6 billion. 

Allianz decreased 3% to €248.80 after the German insurance company reported slightly lower-than-expected fourth-quarter earnings. 

Chemring decreased 1.5% to 357.0 pence after the aerospace and defense group reiterated its fiscal 2024 outlook. 

ABB declined 1.7% to CHF 39.93, and the Swiss engineering company appointed Morten Wierod as its new chief executive officer.

Deutsche Telekom declined 2.5% to €21.78 after the German telecom operator reported a loss of €1.04 billion, or 21 euro cents, in the fourth quarter. 

Deutsche Lufthansa dropped 4% to €7.20 after the German airline reshuffled its board.