FX.co ★ Strong German data pushed European stocks higher

On Tuesday, Western Europe's leading stock market indicators were showing strong gains after falling the day before. Traders were analyzing fresh macro data on Germany and waiting for decisions of the European Central Bank, the Bank of England and the U.S. Federal Reserve on the key interest rate.

The pan-European Stoxx 600 rose by 0.19% to 437.82 points.

The French CAC 40 gained 0.21%, the German DAX gained 0.36% and the British FTSE 100 gained 0.25%.

Leaders of growth and decline

Shares of British American Tobacco, a manufacturer of cigarettes, tobacco and nicotine products fell by 0.9% after the U.S. Supreme Court on Monday cleared the way for California to enforce a voter-approved ban on flavored tobacco products.

British hotel chain operator IHG rose by 0.2% as the company announced on Tuesday that Michael Glover will take over as CFO, effective March 2023.

German tourist operator TUI AG rose by 2.3%. Despite the energy crisis and record level of inflation, the company expects an increase in demand for tourist trips next summer.

The share price of Italian Banco BPM soared by 3.5%. Fondazione Enasarco has bought 1.97% of Banco BPM, the specialist Italian pension fund said on Tuesday.

Spanish pharmaceutical company PharmaMar shares fell by 1.4% after the Ibex-35 Technical Advisory Committee announced its exclusion from the Spanish stock market index as of December 19.

Swiss software developer for financial companies Temenos jumped by 4.3%.

The share price of Rolls-Royce Holdings PLC, a British manufacturer of equipment for aviation and ships fell by 3.3%.

Market sentiment

On Tuesday, European investors were analyzing fresh statistics on the countries of the region. Thus, according to the final assessment of analysts, the inflation rate in Germany declined in annual terms to 10% in the past month from 10.4% a month earlier.

Meanwhile, the level of wages in the UK rose by 6.1% in October.

Industrial production in Italy in October fell by 1% on a monthly basis and 1.6% on an annual basis. At the same time experts predicted a decline of the first indicator by 0.4%, and the second by 0.1%.

Investors are anxiously awaiting the forthcoming December meetings of the ECB, the Fed and the BoE on monetary policy. In addition, the Swiss and Norwegian central banks will hold meetings this week.

Last week, the Reserve Bank of Australia raised its official cash rate to 3.1%, a 10-year high. In addition, representatives of the central bank reiterated forecasts of the need for further rate hikes in order to curb record levels of inflation.

The results of the ECB and the BoE meetings will be announced on Thursday. Markets forecast that both central banks will raise the interest rate on the backdrop of the permanent growth in inflation. Earlier in his interview to the Italian newspaper Milano Finanza, ECB Chief Economist Philip Lane said consumer-price growth is probably near its zenith.

The ECB raised all three key ECB interest rates by 75 basis points. Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2.00%, 2.25% and 1.50% respectively. Most analysts expect the ECB to increase the lending rate to at least 2% from 1.5% at its December meeting.

In addition, the Fed will announce its monetary policy decision on December 14.

Recall that last Wednesday Fed Chairman Jerome Powell spoke at the Brooking Institute Hutchins Center on fiscal and monetary policy.

In his statement, the head of the central bank signaled a potential easing of monetary policy and a slowdown in future interest rate hikes on the back of more favorable data on inflation in America.

The minutes of the Fed's November meeting were released last Friday. According to the document, the majority of the Fed leaders considered it reasonable and appropriate to slow down the central bank's interest rate hike in the near future.

According to the world's leading derivatives marketplace CME Group, to date, 71.1% of analysts expect to raise the interest rate at the December meeting by 50 points - to 4.25-4.5% per annum.

Recall that the central bank raised interest rates by 75 basis points in October for the fourth consecutive meeting. The rate is currently at its highest level since January 2008, at 3.75-4.00% per annum.

Next Friday, Eurostat will publish its final estimate of annual inflation in the euro area at the end of last month. According to experts' preliminary forecasts, consumer price growth fell to 10% in November from October's 10.6%.

As for news from the United States, the report of the US Department of Labor on the Consumer Price Index (CPI) will be published on Tuesday evening. It may affect the Fed's next steps in monetary policy. According to experts' expectations, the inflation rate in the country increased by 7.3% in November in annual terms after the October growth of 7.7%. In this case, the level of core inflation, which does not include food and energy prices, analysts forecast slowed to 6.1% from 6.3%.

Trading results the day before

On Monday, the leading stock exchange indicators of Western Europe closed the trading session in the red zone.

The Stoxx Europe 600 fell by 0.49% to 436.98 points.

French CAC 40 declined 0.41%, German DAX gained 0.45% and British FTSE 100 lost 0.41%.

The London Stock Exchange soared 3% on news that U.S. tech giant Microsoft will buy up to 4% of the group as part of a deal to enmesh Microsoft's services into the exchange's operations.

Quotes of the British commercial bank Metro Bank fell by 0.9%. The Financial Conduct Authority (FCA) fined Metro Bank $12.2 million for breaching rules by publishing false information for investors.

The share price of the Danish transport and logistics company A.P. Moller-Maersk AS fell by 2.6%. It announced that Vincent Clerc, currently CEO of the company's Ocean & Logistics business, will succeed as CEO of Maersk effective January 1st, 2023.

Danish biotech company Novozymes AS fell by 15% on news of its merger with rival Chr. Hansen. The merger is expected to complete in the fourth quarter of 2023. Meanwhile, Chr. Hansen's soared 17.6%.

Quotes of French pharmaceutical company Sanofi SA fell by 0.2%.

On Monday, European investors analyzed fresh statistics on the countries of the region. According to the UK Office for National Statistics, the volume of industrial production in the country fell in October by 2.4% y/y after a 3.1% decline in September. In this case, the October fall was the lowest since June this year. Analysts on average forecasted a decrease in industrial production by 2.8%.

Meanwhile, in monthly terms, the index increased by 0.7% in October, and its increase was marked for the first time since May 2022. The key reason for such a spectacular rise was the growth of food and beverage production by 0.2%, refined petroleum products by 1.3%, pharmaceutical products by 8.4%, rubber and plastic products by 0.7%, and transport equipment by 2.3%.