European Markets Extend Weekly Gains Ahead of ECB Rate Decisions

Bridgette Randall
10 Apr, 2024
Frankfurt

European markets advanced in Wednesday's trading as investors awaited release of the ECB's monetary policy decision on Thursday. 

Market sentiment has wavered between euphoric and cautious over the last five trading sessions as investors debate rate paths and economic conditions in the Euro Area. 

ECB President Christine Lagarde signaled, after the last rate-setting meeting on March 7, policymakers are likely to approve a rate cut at the end of the meeting in June or after. 

Those comments from Lagarde set in motion a market advance and lifted benchmark indexes in France and Germany to new record highs. 

Inflation has moderated from as high as 9% to close to 3% over the last eighteen months, but despite multiple interest rate hikes, inflation has stayed significantly above the central bank's target rate of 2%. 

Moreover, energy prices have rebounded in the last five weeks, and higher prices are likely to fuel inflationary forces. 

In addition, service inflation has stayed firmly above 4%, posing a challenge to policymakers in lowering inflation to closer to its target rate. 

Later in the day, the U.S. consumer price inflation report is scheduled to be released at 2:30 p.m. CET. 

Investors are anticipating the overall annual pace of inflation in March to rise to 3.4%, and increase 0.35% from the previous month. 

 

Europe Indexes and Yields

The DAX index increased by 0.7% to 18,198.24, the CAC-40 index rose by 0.5% to 8,089.95, and the FTSE 100 index inched higher by 0.6% to 7,981.89.

The yield on 10-year German bonds edged down to 2.36%; French bonds inched lower to 2.86%; the UK gilts edged higher to 4.07%; and Italian bonds inched lower to 3.69%.

The euro edged higher to $1.086, the British pound inched higher to $1.27, and the U.S. dollar edged lower to 90.34 Swiss cents.

Brent crude decreased $0.34 to $89.79. a barrel, and the Dutch TTF natural gas rose by €0.21 to €27.34 per MWh.

 

Europe Stock Movers

Semiconductor equipment companies advanced, following better-than-expected quarterly results from Taiwan Semiconductor.

Infineon Technologies increased 1.9% to €34.19, STMicroelectronics gained 1.4% to €40.12, and ASML Holding added 1.5% to €912.50. 

Barry Callebaut soared 8.1% to CHF 1,330.0, after the Swiss chocolate maker reported higher first-half sales. 

Revenue in the first half ending in February increased 11.1% to CHF 4.6 billion from CHF 4.2 billion; recurring net profit declined 7.9% to CHF 215.8 million from CHF 234.3 million; and free cash outflow surged to CHF 1.1 billion from CHF 188 million a year ago, respectively. 

The chocolate company secured additional financing of CHF 600 million to mitigate higher cash requirements in cocoa bean sourcing and the long cash conversion cycle from cocoa bean sourcing to chocolate sales. 

The company projected cocoa bean prices are likely to stay volatile for the rest of the year, and reiterated its annual flat volume and annual recurring operating earnings. 

Philips NV rose 2.6% to €19.63 after the Dutch medical device company reached a final settlement with U.S. regulators, primarily linked to its Respironics operations. 

Tesco PLC jumped 4.5% to 300.40 pence after the UK-based grocery chain posited a 11% increase in profit in the financial year 2023-2024, and the supermarket chain operator estimated an increase in profit in the current year. 

Mining companies advanced for the third day in a row after commodity prices continued to rise on the back of strong global manufacturing activity. 

Copper jumped to a 15-month high and approached the record high reached two years ago; gold traded near the record high; and silver hovered near the multi-year high.

Glencore, BHP, Rio Tinto, Anglo American, and Antofagasta advanced between 0.5% and 1.4%. 

THG PLC dropped 9% to 62.0 pence after the cosmetics and dietary supplement e-commerce retailer said its revenue declined after the company discontinued loss-making operations. 

Revenue in 2023 declined 8.7% to £2.1 billion from £2.2 billion, and adjusted operating earnings from continuing operations rose 78% to 114.1 million from £64.1 million a year ago. 

The company said revenue trends in 2024 are "continuing to improve with notable momentum in beauty" and added that the company is likely to "meet consensus estimates" for its annual results.