On Thursday, the leading stock indices of Western Europe were trading mainly in the red zone. European investors were under pressure due to the release of the minutes of the Federal Reserve's December meeting.
Thus, the pan-European Stoxx 600 fell by 0.1% - to 440.03 points.
By the way, the Stoxx 600 index fell by 13% in 2022. This decline was the sharpest since 2018, and the main reasons are the negative consequences of the situation in Ukraine, the global energy crisis, as well as the permanent acceleration of inflation and decisive actions of global central banks to combat it.
On Thursday, the French CAC 40 declined by 0.16%, the German DAX gained 0.05% and the British FTSE 100 gained 0.37%.
Meanwhile, the CAC 40 is down 8.7%, the DAX is down 11.9% and the FTSE 100 is up 1.4%.
Leaders of growth and decline
The share price of Swedish carmaker Volvo Car fell by 4.7%. The company's car sales fell 12% in 2022 on year amid supply-chain challenges and production restraints in China.
UK retailer of clothing, footwear and household goods Next Plc soared by 7.3%. During the holiday period, which ended on December 30, the company recorded better than expected sales growth. Consequently, Next raised its earnings guidance for the fiscal year ending in January. In addition, the company upgraded its pre-tax profit guidance for the full year to 860 million pounds.
The share price of Irish airline Ryanair Holdings Plc rose 7%. The day before, Europe's largest budget carrier improved its forecast for the current fiscal year ending in March amid high demand for the company's services during the New Year holidays.
Finnish airline Finnair Oyj increased by 1.7%. This morning the company's management reported an 11% increase in passenger numbers for December 2022.
Market sentiment
On Thursday, European traders assessed the release of the Fed's December minutes. According to the document, the US central bank plans to continue tightening monetary policy until inflation returns to the 2% target level.
Thus, the hopes for possible softening of the monetary policy by the Fed in 2023 are not yet justified.
Recall that during the December meeting, the Fed raised the interest rate by 50 basis points - up to 4.25-4.5% per annum. At the same time, US interest rates set by the Fed rose to their highest since 2007. In a commentary on December's meeting, Fed Chairman Jerome Powell said the US central bank would stay on course to tighten monetary policy until inflation returned to the 2% target.
According to the latest data of the largest North American financial derivatives market CME Group, more than 70% of experts expect the key interest rate in the US to increase by 0.25 percentage point in February, up to 4.5-4.75% per year.
On Wednesday, European investors also analyzed the latest data on the largest countries of the region. Thus, according to preliminary information from France's National Statistics Office (Insee), consumer prices in the country rose 6.7% y/y in December. The inflation rate fell compared with the November rate of 7.1%. In this case, experts on average predicted an increase in December by 7.2%.
Meanwhile, the eurozone's construction Purchasing Managers' Index (PMI) fell to 42.6 points in December 2022 from 43.6 points in November 2022. The PMI has remained below the 50-point mark for eight months in a row. Recall that a figure below 50 points indicates a decline in activity in the sector.
According to the latest report of the Statistical Office of the European Union (Eurostat), eurozone producer price inflation fell to its lowest level since December 2021, with prices registering an annual increase of 27.1% from 30.5% in October. At the same time, producer prices fell by 0.9% in November compared to the month prior.
European investors continue to discuss news on easing of Covid controls in China, which have been among the strictest in the world over the past few years. China will lift mandatory quarantine measures for inbound travelers from January 8. A negative test for coronavirus will be required to enter the country.
In addition, Beijing authorities reduced the level of surveillance of the coronavirus, rejecting the legal basis for the introduction of enhanced infection control measures.
In response to this move by Chinese authorities, some states have tightened requirements for visitors from the PRC. The United States, for example, is introducing mandatory testing for people arriving by air from China as of Jan. 5.
Traders around the world have recently been seriously concerned about China's "zero-Covid" policy, as new and existing restrictive measures in China have had a negative impact on the country's economic activity as well as on stock trading.
At the end of November, mass protests erupted in Shanghai against China's stringent Covid restrictions. The police dispersed protesters with gas canisters.
After that, markets began to hope that mass protests in Chinese cities would force local authorities to loosen regional restrictions. Fresh news from China sent a welcome positive signal that the world's second-largest economy could return to robust growth.
Trading results the day before
On Wednesday, the leading stock indices of Western Europe closed in the green zone.
Thus, the Stoxx 600 soared by 1.38% to 440.19 points.
France's CAC 40 gained 2.3%, Germany's DAX gained 2.18% and Britain's FTSE 100 gained 0.41%.
The share price of German software company SAP rose 2.8%.
German technology company Siemens AG rose 3.3%.
The share price of German semiconductor manufacturer Infineon Technologies rose by 3%.
German reinsurance company Munich Re soared by 4.6%
The share price of the largest German insurance company Allianz SE rose by 3.1%.
British insurer Prudential Plc gained 2.6%.
The share price of British corporation providing financial services Standard Chartered has grown by 1.9%.
European oil companies British Petroleum, Shell and Glencore have shed by 3.6%, 3.5% and 6.9% respectively.
The share price of European holding airline Air France-KLM rose by 4.5%.
