German Business Outlook Index Drops to the Lowest Since May 2020, Eurozone Trade Surplus Shrinks

Bridgette Randall
17 Dec, 2024
London

European markets struggled to stay above the flatline amid weakening sentiment and worsening economic outlook.

Benchmark indexes in Frankfurt and Paris managed to rebound, but they eased in London amid economic growth and inflation worries. 

 

German Business Climate Index Deteriorates 

The Ifo Business Climate Indicator for Germany fell for the second consecutive month to 84.7 in December from 85.6 in November, the Ifo Institute said in its monthly report. 

While sentiment in the construction sector improved, it worsened in the manufacturing and services sectors. 

The index dropped to the lowest since May 2020, but the decline was mostly because of the pessimistic outlook. 

"The weakness of the German economy has become chronic," the Ifo report noted. 

The sub-index for business expectations dropped sharply to 84.4 from 87, but the measure for current conditions improved to 85.1 from 84.3 in the previous month. 

Business sentiment remained the weakest in the construction and manufacturing sectors. 

 

Euro Area Trade Surplus Shrank In October 

The Euro Area trade surplus decreased for the second consecutive month in October amid weakening exports, Eurostat reported Wednesday. 

The currency union's trade surplus shrank to €6.8 billion in October from €9.4 billion in the previous year, after exports rose 2.1% from a year ago to €254 billion and imports advanced 3.2% to €247.2 billion. 

In the wider region of the European Union, trade surplus plunged to €3.9 billion from €8.4 billion a year earlier, after exports advanced at a faster pace than imports. 

Exports rose 0.9% to €227 billion, and imports advanced 3% to €223.1 billion. 

This decrease in trade surplus was mainly driven by the fall in surplus in chemicals and related products from €19.3 billion to €17.8 billion and an increase in the deficit for energy from €26.0 billion to €29.1 billion.

Despite the export weakness in recent months, the overall trade surplus in the January to October period soared from the corresponding period in the previous year. 

In the ten months to October 2024, the eurozone recorded a surplus of €143.3 billion, compared with €22.7 billion in the previous year.

 

Europe Indexes and Yields

The DAX index increased by 0.1% to 20,338.91; the CAC-40 index rose by 0.1% to 7,368.93; and the FTSE 100 index inched lower by 0.8% to 8,194.95.

The yield on 10-year German bonds edged lower to 2.23%, French bonds inched up to 3.03%, the UK gilts increased to 4.51%, and Italian bonds increased to 3.40%.

The euro edged higher to $1.05; the British pound inched up to $1.27; and the U.S. dollar advanced to 89.21 Swiss cents.

Brent crude decreased $0.55 to $73.35 a barrel, and the Dutch TTF natural gas rose by €1.01 to €40.48 per MWh. 

 

Europe Stock Movers

Energy explorers declined on stock exchanges following the weakness in crude oil prices amid expectations of falling demand growth in China. 

Shell PLC fell 1.4% to 2,421 pence, BP plc eased 0.8% to 381.95 pence, TotalEnergies SE eased 1.5% to €51.70, and Repsol SA declined 1.6% to €11.09. 

Capita PLC dropped 9.2% to 15.84 pence after the UK-based outsourcing firm reported an 8% decline in revenue in the eleven months to November. 

Thyssenkrupp Nucera AG jumped 14.1% to €10.17 after the German company reported record quarterly revenue for its alkaline electrolysers. 

Revenue in the fiscal fourth quarter increased 50% to €250 million from €167 million, net income jumped 81% to €10 million from €6 million, and earnings per share advanced to 8 cents from 4 cents a year ago. 

For the full year, revenue increased 4% to €636 million from €613 million; net income plunged 52% to €11 million from €24 million, and earnings per share fell 60% to 9 cents from 22 cents a year ago.