On Wednesday, European markets closed the trading session in the green zone, showing growth by 1.5-2%. Investor sentiment brightened due to new data and forecasts for Germany, as well as strong corporate news from European companies.
The pan-European Stoxx 600 rose by 0.8% to 427.51 points. Bloomberg, the leading U.S. financial information provider, reported that the STOXX Europe 600 indicator ends the current year with a decline of more than 13%. This decline will be the sharpest since 2018, and strategists call the negative consequences of the situation in Ukraine, as well as the global energy crisis its key reason.
The French CAC 40 jumped 2.01%, the German DAX rose 1.54%, and the British FTSE 100 gained 1.72%.
Leaders of growth
European companies producing sporting goods rose on Wednesday on the back of stronger-than-forecasted reports of the U.S. competitor Nike Inc. for the past quarter. German Adidas AG and Puma SE soared 7.7% and 8.5%, respectively, while shares of British sporting goods retailer JD Sports jumped 6.7%.
The share price of the German energy company Uniper SE increased by 5.9%. The European Commission approved the stabilization package for Uniper, the recapitalisation involves an immediate cash capital increase of 8 billion euros.
French oil and gas company TotalEnergies grew by 1.6% and the British-Dutch Shell - by 1% amid the rise in world oil prices.
Market sentiment
On Wednesday, European investors analyzed the latest data on Germany Thus, according to the data of GfK published in the morning, the research company is forecasting -37.8 points in consumer sentiment for January 2023, up 2.3 points from December of this year (revised from -40.1 points). At that, experts forecasted a level of -38 points. The growth of the index was recorded by analysts from GfK for the third month in a row.
European investors also paid attention to positive trends on US exchanges. Thus, on the previous day, S&P 500 rose by 0.1%, NASDAQ Composite gained 0.01% and Dow Jones Industrial Average gained 0.28%.
Trading results the day before
On Tuesday, European markets closed lower, and only the British stock index was in the green zone. Companies in the technological, industrial, and real estate sectors showed the biggest losses.
The Stoxx Europe 600 fell by 0.4% - to 424.18 points.
French CAC 40 decreased 0.35%, German DAX lost 0.42% and British FTSE 100 gained 0.13%. The key reason for the FTSE's growth was the spectacular rise in oil and mining sectors.
The previous day, the share price of European companies producing luxury goods and dependent on the Chinese market fell amid fears over the increased number of COVID-19 cases in the country. Thus, the shares of Louis Vuitton fell by 0.6% and Kering collapsed by 3.8%.
French telecoms group Orange plummeted 1% on news that its deputy chief executive and chief financial officer is leaving the company.
The share price of the Swedish manufacturer of electrical appliances Electrolux AB fell by 1.2%. The company said late Monday that the divestment of its manufacturing facility in Memphis has been postponed since the buyer requested to move closing of the transaction to the first half-year 2023.
French energy company Engie SA has dropped 5.3%. The energy group warned that it expects its 2022 and 2023 earnings to suffer a hit from the European Union's decision to impose a cap on revenue from power generation.
German real estate company Aroundtown S.A. plummeted 10%.
Norwegian hydrogen producer NEL ASA lost 9.7%.
On Tuesday, European traders continued to analyze the monetary policy decisions of the world's leading central banks.
European investors were actively discussing the Bank of Japan's surprise move, which at the end of the December meeting kept the rate at negative level at -0.1%. According to the BOJ, 10-year JGB can now move 50 basis points either side of its 0% target. This is wider than the previous 25 basis point band. By the way, most experts expected that the BOJ will keep the band at the same level.
Traders took such a move as a signal of tighter monetary policy.
Recall, last week the European Central Bank raised the main interest rate by 50 basis points to 2.5%. In addition, representatives of the ECB said they believe further rate hikes are necessary in order to achieve the inflation target of 2%.
The ECB expects inflation to fall from an average of 8.4% in 2022 to 6.3% in 2023. Inflation is then expected to fall to an average of 3.4% in 2024. At the beginning of autumn, analysts at the ECB estimated these figures at 8.1%, 5.5% and 2.3%, respectively.
According to the new forecast, annual average real GDP growth is expected to rise by 3.4% in 2022 against the previously assumed 3.1%.
As part of its October meeting, the ECB raised all three key interest rates by 75 basis points. At the same time, the indicator of the base interest rate on loans was increased to 2%, deposit rates up to 1.5%, and rates on margin loans up to 2.25%.
The Bank of England also increased its base rate by 50 basis points, to 3.5% from 3%. The Monetary Policy Committee announced it had raised interest rates for the ninth meeting in a row, thereby hitting their highest level for 14 years. In addition, representatives of the central bank said it intends to pursue a tactic of further rate hikes to combat record levels of inflation and recession in the economy.
The Bank's experts predict that in the fourth quarter of this year, the UK gross domestic product will fall by 0.1% after falling by 0.5% in the previous quarter.
As part of its November meeting, the BoE raised the rate by 75 basis points, the highest hike since 1989.
Last Wednesday night, the Federal Reserve raised its interest rate by 50 basis points to 4.25%-4.5%. At the same time, the rate reached its highest level since 2007. In a comment on the results of the December meeting, Fed Chairman Jerome Powell said that the US central bank will stay on course to tighten monetary policy until inflation returns to the 2% target level.
On Tuesday, European investors also analyzed the latest data on the countries of the region. Thus, the yield on German 10-year government bonds soared to the highest in more than a month. According to data published by the German Federal Statistical Office (Destatis), the country's producer prices (PPI) rose 28.2% year on year in November. The increase was recorded for the second month in a row, with experts forecasting on average a 30.6% rise in PPI in November.
