Euro Area Inflation Accelerated and UK Home Price Growth Slowed In December

Bridgette Randall
07 Jan, 2025
London

European markets lacked direction as investors reviewed the latest inflation updates and debated rate paths ahead of the policy meeting later this month. 

Benchmark indexes in Paris, Frankfurt, Milan, and London wavered around the flatline after the Euro Area inflation accelerated in December. 

 

Euro Area Inflation Accelerated for the Third Consecutive Month 

The consumer price index in the eurozone increased for the third month in a row in December to 2.4% from 2.2% in November, Eurostat reported Tuesday. 

The rebound in inflation was widely anticipated because of the base effects driven by the large decline in energy prices that are no longer available in energy prices. 

Inflation for food, alcohol, and tobacco was stable, but for energy and services, it accelerated and eased for non-energy goods. 

 

Inflation in Germany and France Diverged In December 

The annual inflation in France was unchanged at 1.3% in December from the previous month, France's statistical agency INSEE reported Tuesday. 

On Monday, Germany's statistical agency Destatis confirmed that the annual consumer price inflation accelerated to 2.6% in December, largely driven by the increase in energy prices. 

 

Italy's Jobless Rate Dropped to Record Low In December

The jobless rate in Italy decreased to 5.7% in December from 5.8% in the previous month, the National Institute of Statistics, or ISTAT, reported Tuesday. 

The jobless rate dropped to the lowest level since record keeping began in 1983. 

The number of people seeking jobs decreased by 24,000 to 1.46 million, the lowest since April 2007; the employment participation rate was unchanged at 66.3%, and the number of employed eased by 13,000 to 24.06 million. 

 

UK Home Price Growth Slowed In December 

UK home prices rose at the slowest pace in five months in December, and the average home price eased, Halifax and Bank of Scotland said in a report. 

The Halifax House Price Index increased 3.3% from a year ago in December, following a downwardly revised 4.7% increase in November. 

The average house price eased 0.2% from the previous month to £297,166, after rising for two consecutive months. 

"While the housing market has been supported in recent months by falling mortgage rates, income growth, and the announcement on upcoming stamp duty policy changes, mortgage affordability will remain a challenge for many, especially as the Bank Rate is likely to come down more slowly than previously predicted. 

However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well, and, taking all this into account, we’re continuing to anticipate modest house price growth this year,” said Amanda Bryden, Head of Mortgages, Halifax. 

 

Europe Indexes and Yields

The DAX index increased by 0.2% to 20,255.52; the CAC-40 index rose by 0.5% to 7,480.62; and the FTSE 100 index inched lower by 0.2% to 8,233.65. 

The yield on 10-year German bonds edged higher to 2.46%, French bonds rose to 3.28%, the UK gilts increased to 4.65%, and Italian bonds rose to 3.60%.

The euro edged higher to $1.043; the British pound inched up to $1.255; and the U.S. dollar eased to 90.51 Swiss cents.

Brent crude increased $0.38 to $76.67 a barrel, and the Dutch TTF natural gas fell by €0.79 to €46.40 per MWh. 

 

Europe Stock Movers

NEXT plc increased 3.8% to 9,916.0 pence after the specialty retailer reported strong sales in Christmas and raised its profit estimate for 2025. 

Sodexo SA dropped 8.4% to €72.55 after the French food services and facilities management company reported a weaker-than-expected increase in revenue in its fiscal first quarter. 

Organic revenue in the quarter ending in November increased 4.6% to Є6.4 billion, after higher sales in Australia, Brazil, and India were offset by the weakness in Continental Europe. 

Organic growth was impacted by a higher base due to the Rugby World Cup last year, partially offset by the Paralympics this year, and excluding these events, underlying organic growth in the first quarter was 4.9%. 

Organic growth was driven by a 3% price increase, and the remainder increase was supported by new business contribution and sales volume growth.