European Markets Lacked Direction, Germany's PPI Accelerated but Residential Permits Extended Decline

Bridgette Randall
20 Jan, 2025
London

Stock market indexes in the eurozone lacked direction as investors awaited the release of key corporate earnings. 

In a holiday-shortened week in the U.S., benchmark indexes in Frankfurt, Paris, and London edged slightly higher ahead of the ECB's rate decision next week. 

Investors have built expectations that the central bank will announce its first rate cut in 2025 and follow through on the estimate delivered at the last policy meeting on December 12. 

Despite the weakening economic backdrop, market indexes in Germany and the U.K. are hovering near record highs on the hopes that the European Central Bank will lower rates by at least 100 basis points in 2025. 

This week, investors are looking forward to the release of business activities surveys in the eurozone, Germany, and the U.K.

Passenger car registration data is also scheduled to be released, and hybrid cars are likely to confirm the recent demand trend in December.

 

Germany's Producer Price Inflation Accelerated In December 

Germany’s producer prices increased 0.8% in December compared to a year ago after more than a year of deflation. 

The rise in inflation was driven by an increase in capital goods prices, particularly for machinery, motor vehicles, trailers, and semi-trailers.

Energy prices fell by 0.2% with higher heating costs, and excluding energy, producer prices rose by 1.2%.

On an annual average basis, industrial producer prices were 1.8% lower in 2024 than in 2023.

In a key economic indicator, Germany's residential building permits extended a recent string of decline amid elevated interest rates and rising construction costs. 

 

Germany's Residential Building Permits Extended Recent Decline In November 

Apartment construction permits decreased 13% or 2,700 to 17,900 in November from a year ago. 

In the eleven-month period to November, residential permits declined 18.9%, or 45,200, to 193,700. 

A total of 14,200 apartments were approved for new residential buildings in November 2024. This was 16.8% or 2,900 apartments fewer than in the same month last year. From January to November 2024, 158,000 new apartments were approved, 21.8% or 44,100 fewer than in the same period last year. 

The number of building permits for single-family homes fell by 22.1%, or 9,900, to 34,800. 

For two-family homes, the number of approved apartments fell by 12.7%, or 1,700, to 11,700. 

The number of approved apartments also fell significantly in the numerically largest building type, multi-family homes, by 22.4% or 29,300 to 101,200 apartments. 

 

Europe Indexes and Yields

The DAX index increased by 0.05% to 20,913.69; the CAC-40 index rose by 0.09% to 7,716.60; and the FTSE 100 index edged higher by 0.2% to 8,522.58.

The yield on 10-year German bonds inched higher to 2.51%, French bonds rose to 3.38%, the UK gilts increased to 4.70%, and Italian bonds edged lower to 3.65%.

The euro was higher at $1.03; the British pound inched higher to $1.22; and the U.S. dollar was higher at 91.28 Swiss cents.

Brent crude decreased $0.29 to $80.48 a barrel, and the Dutch TTF natural gas fell by €0.90 to €46.23 per MWh.