Wednesday, February 8, 2023
HomeBusinessEuropean markets marginally lower as investors digest central bank announcements

European markets marginally lower as investors digest central bank announcements

Borrowing costs in the eurozone are rising on signals of interest rate hikes by the ECB

Eurozone bond yields rose after the European Central Bank clearly signaled to investors that interest rates will continue to rise and that no cuts are on the horizon.

The yield on German 10-year bonds, considered a benchmark for eurozone lending, rose 12 basis points to 2.2% at 11:30 a.m. Berlin time.

Yields on 2-year bonds rose 11 basis points to 2.5%, the highest level since 2008, while the inversion of the German yield curve reached a new 30-year high.

An inverted yield curve has previously been a predictor of a recession and indicates deteriorating short-term economic expectations.

The ECB slowed the pace of rate hikes to 50 basis points on Thursday, but also announced the start of quantitative tightening in March 2023, saying hikes would continue at a “significantly steady pace”.

It said the inflation forecasts it uses have been revised upwards and do not point to a return to the 2% target until 2025; but also that it expected a recession in the bloc to be “relatively short-lived and superficial”.

— Jennifer Reid

European indices have remained resilient despite external shocks, Euronext CEO says

European indices have remained resilient despite external shocks, Euronext CEO Stephane Boujnah told CNBC’s Joumanna Bercetche at the Paris Conference.

Boujnah discussed recent market volatility, the strength of commodities and primary quotes in the UK

According to PMI data, the slowdown in business activity in the Eurozone is easing

Eurozone activity continues to slow, according to S&P Global’s flash-composite Purchasing Managers’ Index (PMI), but the slowdown is easing.

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The PMI rose to a four-month high of 48.8, up from 47.8 in November.

The new data suggests that while a recession is likely, it could be shallower than previously expected.

December was the sixth month in which the figure fell below 50 that divides growth and contraction, marking the longest period of decline since June 2013.

—Hannah Ward Glenton

According to PMI data, the economic downturn in the UK is easing

According to data from the UK’s S&P Global Composite Purchasing Managers’ Index (PMI), the downturn experienced by UK companies has moderated somewhat over the past month.

The index rose unexpectedly from 48.2 in November to 49.0, well above Reuters economists’ estimate of 48.0.

The services sector is rising, while British manufacturing continued to decline.

—Hannah Ward Glenton

Norwegian oil company Aker BP will invest $20.5 billion in new oil and gas projects

Norwegian oil company Aker BP will invest more than 200 billion Norwegian kroner ($20.5 billion) in developing oil and gas fields around Norway in the coming years, the company said.

Aker BP was one of several oil companies working off the coast of Norway to submit project plans for approval before the temporary tax breaks expire at the end of the year.

Partly owned by BP, Aker BP is the second largest petroleum producer outside Norway after Equinor.

—Hannah Ward Glenton

Games Workshop shares are up 12% after Amazon deal announcement

Games Workshop shares rose 12% after the company announced an agreement with Amazon to develop one of its games into film and TV productions.

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The British game manufacturer is best known as the creator of the miniature wargame Warhammer 40,000, which Amazon is now allowed to use for its content services.

—Hannah Ward Glenton

European markets: Here are the opening calls

European stock markets are expected to open higher on Friday.

The UK FTSE 100 is up about 33 points at 7,456, the German DAX is expected to rise about 33 points to 14,019 and the French CAC 40 is expected to add about 18 points to 6,533. Italy MIB index is set to add 32 points to 23,787.

—Hannah Ward Glenton

CNBC Pro: Morgan Stanley Doubles Down on Big Tech Stocks – Says It Could Rise Up to 65% More

Big Tech stocks have been hit hard by the sell-off this year, but Morgan Stanley thinks the current one-stock share price weakness presents an “opportunity to own one of the best tech platforms.”

Pro subscribers can read more here.

— Zavier Ong

UBS raises 2023 growth outlook for China, lowers 2022 forecast

UBS raised its outlook for China’s gross domestic product in 2023 to 4.9% from 4.5% previously, according to its Chinese chief economist Wang Tao, citing an earlier and faster reopening in the country.

Wang said the company expects weaker fourth-quarter GDP for 2022, lowering its full-year forecast from 3.1% to 2.7%, pointing to weakened growth in November with a recent rise in the number of Covid cases.

The company added that the Central Economic Work Conference is likely to prioritize stabilizing growth and supportive macro policies for the year ahead.

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“We expect fiscal policy to remain proactive with a small increase in the headline deficit and a new special LG [local government] bonds, monetary and credit policy to remain supportive with continued ample liquidity, but further policy rate cuts are unlikely,” Wang said in the note.

— Jihye Lee

Equity futures open lower

Equity futures opened lower as investors endured a second day of sell-off.

Futures linked to the Dow lost 40 points or 0.1%.

S&P 500 and Nasdaq 100 futures both fell 0.1%.

—Alex Harring

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