European Stock Markets Begin Week with Modest Gains
European stock markets started the week on a positive note, with slight gains across major indices. Trading activity was limited due to a U.S. holiday and the start of the annual World Economic Forum in Davos. The DAX in Germany was up 0.1%, the CAC in France rose 0.1%, and the FTSE in the U.K. gained 0.1%.
Optimism for Central Bank Rate Cuts
Investors are optimistic about central banks cutting interest rates this year as inflation appears to be easing. Data released last week showed that U.S. consumer prices unexpectedly fell in December, signaling lower inflation in the coming months. Meanwhile, eurozone inflation rose to 2.9% in December after six consecutive months of decline, but this is seen as a temporary blip rather than a sustained upward trend.
German GDP Data Expected to Show Contraction
Later today, Germany’s GDP data for 2023 is expected to be released, and analysts anticipate that it will show a contraction in the eurozone’s largest economy. This aligns with the broader sentiment of subdued growth in the global economy, as indicated by a survey of economists conducted ahead of the Davos meeting. Potential factors impacting growth include geopolitical conflicts, tight financial conditions, and the disruptive effects of artificial intelligence.
Atos Stock Slumps on Free Cash Flow Announcement
In corporate news, French technology company Atos saw its stock slump 14% after it announced that its free cash flow for the second half of the year would be slightly below its initial target. In addition, Atos named Paul Saleh as its new chief executive. News from the U.S. banking sector will also be in focus this week, as Goldman Sachs and Charles Schwab are set to report their earnings. Last week, major U.S. banks reported lower profits due to special charges and job cuts, signaling potential challenges ahead.
Rising Oil Prices Amid Middle East Tensions
Oil prices continued to edge higher, building on last week’s gains, amid ongoing tensions in the Middle East. Disruptions to oil supplies through a key shipping route between Europe and Asia remain a concern. The futures contract for WTI crude traded 0.1% higher at $72.82 a barrel, while Brent crude climbed 0.1% to $78.38 a barrel. The recent escalation of tensions in Yemen has prompted several shipping operators to suspend routes through the Red Sea, raising the possibility of a “strong and effective response” from the Iran-backed Houthi group. Gold also saw a slight increase, while the euro remained relatively stable.
Analyst comment
Positive news: European stock markets started the week with slight gains. Investors are optimistic about central banks cutting interest rates. Oil prices continue to rise amid tensions in the Middle East.
Negative news: Atos stock slumped 14% after announcing lower cash flow. Germany’s GDP data is expected to show a contraction. U.S. banks reported lower profits last week.
Neutral news: Limited trading due to U.S. holiday and World Economic Forum. Eurozone inflation rose in December but seen as temporary. Gold and euro remain stable.
