European markets advance as investors await Fed minutes
French inflation unexpectedly slows
Skyline from the Arc de Triomphe in Paris, France.
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Inflation in France eased to 6.7% in December from a record high of 7.1% last month, preliminary figures published on Wednesday morning showed.
Economists polled by Reuters had forecast year-on-year harmonized inflation, which is adjusted for comparisons across the eurozone, to come in at 7.2 percent.
The most significant fall was energy, where prices rose by 1[ads1]5.1% annually, down from 18.4% in November.
It follows that inflation has eased more than expected in Germany, which on Tuesday reported that HICP fell to 9.6% from 11.3%; and in Spain, which last week recorded a drop to 5.8% from 6.7%.
Analysts are looking for indications that inflation has peaked in the eurozone’s main economies; and whether this will affect the European Central Bank, which previously said that interest rates must go “significantly” higher.
Analysts at ING said the path to significantly lower inflation rates would not be easy, and the outlook remained dependent on factors such as warmer weather and continued pipeline pressures affecting energy prices; war and agricultural sector challenges affecting food prices; and government support programs.
“[Germany’s] the inflation numbers are not a relief, yet, just a reminder that euro zone inflation is still mainly an energy price phenomenon,” they said in a note. “The ECB cannot and will not base its policy decisions on highly volatile energy prices.”
They expect gains of a total of 100 basis points over the next two meetings and updated macro forecasts in March.
Italy will report inflation figures on Thursday, followed by a flash estimate for the eurozone on Friday.
– Jenny Reid
Swiss annual inflation of 2.8% in 2022
Swiss consumer prices rose 2.8% year-on-year and fell 0.2% month-on-month in December, the Swiss Federal Statistical Office said today.
It found that Swiss inflation averaged 2.8% in 2022, up from 0.6% in 2021. It attributed the annual increase to higher costs for petroleum products, gas, cars and rent, offsetting price falls for medicines and landline and mobile communications.
Shares on the way: BKW up 4%, Tenaris down 5%
Swiss power supplier BKW jumped 6% in early trade to lead the Stoxx 600 after projecting “outstanding” full-year results for 2022.
Italian steel pipe manufacturer Tenaris fell 5% to the bottom of the European blue chip index.
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CNBC Pro: Analysts see these 10 global renewable energy stocks rising despite higher prices, with one offering 50% upside
Skyrocketing energy costs have spurred investment in renewable energy around the world.
Swiss investment bank UBS named 10 prominent players in renewable energy that are capitalizing on the trend and are set to outperform in the next year.
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Recently, several pros have urged investors to take a long-term view of the sector, given the importance of chips in several key secular trends.
Analysts singled out one stock in particular they are bullish on, citing its earnings potential and future profitability.
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The US will avoid recession in 2023, says Goldman Sachs
Goldman Sachs has a forecast outside consensus for the US economy in 2023.
“Our economists continue to believe that the US will avoid recession as the Fed succeeds in engineering a soft landing for the economy,” analysts wrote on Tuesday.
“This non-consensus forecast partly reflects our view that a period of below-potential growth is enough to gradually rebalance the labor market and moderate wage and price pressures,” the note said. “But it also reflects our analysis which indicates that the pull from fiscal and monetary tightening will slow sharply next year, contrary to the consensus view that the lagged effects of interest rate hikes will lead to a recession in 2023.”
In addition, the bank today raised its GDP growth forecast for 4Q22 by 10bp to +2.1% on the back of a surprisingly strong release of construction costs in November
“The link between the resilience of the US economy in 2022 and the decline experienced by stocks has been a key narrative over the past year,” Goldman said. “And whether this disconnect continues, or whether the economy matches the market decline, or whether the market rebound in the wake of an economic soft landing may be at least part of the narrative for 2023.”
—Carmen Reinicke
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European markets: Here are the opening calls
European markets are headed for a higher open on Wednesday as investors await the final minutes from the US Federal Reserve, looking for signs that more interest rates are coming.
Britain’s FTSE 100 the index is expected to open 11 points higher at 7,570, Germany’s DAX 28 points higher at 14,227, France’s CAC up 9 points to 6,643 and Italy’s FTSE MIB up 31 points to 24,449, according to data from IG.
In Europe on Tuesday, markets closed higher, boosted after Germany published lower-than-expected inflation figures for December, down to 9.6% year-on-year. Inflation figures from France will come on Wednesday.
—Holly Ellyatt
