European stock markets started the new trading week higher. The key reason for positive market sentiment was the release of new data on the German economy.
The pan-European Stoxx 600 closed 0.25% higher, with all major bourses ending in positive territory.
The French CAC 40 gained 0.75%, the German DAX gained 0.65% and the British FTSE 100 gained 0.51%.
Leaders of growth and declineThe share price of the German motor vehicle manufacturer Volkswagen AG soared by 4.4%. Shareholders approved a special dividend payment of 9.6 billion euros from the initial public offering of Porsche AG securities.
German industrial group Thyssenkrupp AG rose 4.1%.
The share price of the Finnish energy company Fortum Oyj jumped by 3.9%.
French oil and gas giant TotalEnergies SE increased by 3.3%.
The share price of British oil and gas company BP Plc increased by 3.1%.
Market sentimentOn Monday, European investors were analyzing new data on the countries of the region. The ifo Business Climate Index rose to 88.6 points in December, up from 86.4 points (seasonally adjusted) in November. Estimates were only up to 87.4 points.
December's final result showed that sentiment in the German economy has brightened considerably. It is the third consecutive increase. The value of the index was the highest since August of this year.
The IFO Expectations Index, which indicates firms' projections for the next six months, rose to 83.2 in December from the previous month's 80.0. Meanwhile, the Current Economic Assessment improved to 94.4 points in the reported month as against November's 93.1.
Trading results the day beforeOn Friday, Western Europe's leading stock market indicators reported a decline. The week ended in the red zone as well. The day before, traders continued to evaluate the decisions of the European Central Bank, the Bank of England and the U.S. Federal Reserve on the key interest rate.
On Friday, the STOXX Europe 600 composite index of key European companies fell 1.2% to 424.74 points, its lowest in four weeks.
French CAC 40 fell by 1.08%, German DAX lost 0.67% and British FTSE 100 decreased by 1.27%. At the same time, the British index decreased by 1.9% over the trading week, the French index lost 3.4% and the German index decreased by 3.3%. The key reason for the persistent pessimism on the European markets was investors' fears about the prospects for the global economy.
The share price of German biopharmaceutical company MorphoSys AG fell by 11.4%.
BT Group PLC, a British telecommunications company, dropped 1.3%. Earlier, the BT Group unveiled its plans to combine its Global and Enterprise units into a single B2B unit, called BT Business. A move that is excepted to deliver annualized cost savings of at least $121.8 million by the end of fiscal 2025.
The share price of British industrial and electronics distributor RS Group PLC fell 1.1% on news of the resignation of Chief Executive Lindsley Ruth.
Norwegian oil producer Aker BP fell by 1.8%.
The share price of Infineon Technologies, one of the largest chip makers in Europe, sank 2.3%.
German carmaker Volkswagen AG gained 2.2%.
The share price of German carmaker Porsche fell by 1.6%.
On Friday, European traders continued to analyze the results of meetings of the world central banks. Thus, the ECB 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%.
Recall that during the ECB's October meeting, the central bank 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 BoE 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.
On Wednesday night, the Fed 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.
The important event of the week was also the inflation data in the United States for November. According to the report of the U.S. Department of Labor, the consumer price index (CPI) went up 7.1% in November versus a year ago, down from 7.7% in October. Thus, inflation slowed to its lowest level since December 2021. At the same time, experts had forecasted an increase of 7.3%.
On Friday, Eurostat published its final estimate of annual inflation in the 19 countries of the euro region for the past month. The euro zone saw consumer prices slow down to 10.1% in November from 10.6% in October. At the same time, experts forecasted the figure at 10%.
Meanwhile, according to preliminary estimates of analysts, the S&P Global Eurozone Composite PMI increased to 48.8 in December of 2022 from 47.8 in November. Traditionally, the PMI value below 50 points signals the decline of business activity in the sector. By the way, in the euro area this indicator has remained below the 50-point mark for the fifth month in a row.
The S&P Global Germany Composite PMI edged higher to 48.9 in December of 2022 from 46.3 in November, while in France it fell to 48 points from 48.7 points.
According to the UK Office for National Statistics (ONS), retail sales fell by 0.4% last month compared to October. Analysts on average expected an increase of 0.3%.
According to final data from France's Insee National Statistics Office, the country's annual inflation rate in November remained at October's level of 6.2%, while monthly inflation fell to 0.3% from 1% in October. At the same time the increase in prices for food made 12.1%, for energy - 18.4%, for industrial goods - 4.4% and for services - 3%.
No change to French business sentiment as we get into the final month of the year, staying just slightly above its long-term average of 100. At the same time, analysts predicted a drop in the indicator to 100 points.
According to the European Association of Automobile Manufacturers (ACEA), the EU new passenger car market reported another strong growth at 16.3%, the fourth in a row this year, to 829,527 units sold in November 2022. Last month's volume of sales still remains much lower than the pre-pandemic level.