European stocks lower; German inflation remains high ahead of Fed minutes

  • Stock Market News
European stocks lower; German inflation remains high ahead of Fed minutes
Credit: © Reuters.

By Peter Nurse - European stock markets traded lower Wednesday, as investors digested elevated German inflation data and more corporate earnings ahead of the release of the minutes from the last U.S. Federal Reserve meeting. 

At 03:40 ET (08:40 GMT), the DAX index in Germany traded 0.8% lower, the CAC 40 in France dropped 0.8% and the FTSE 100 in the U.K. fell 1%.

German consumer prices rose 1.0% on the month in February, after falling 0.8% the prior month, resulting in the annual figure climbing 8.7%, above January’s 8.6%.

On a harmonized basis, compared with other European Union countries, the CPI rose by 9.2% on the year in January, and 0.5% on the month.

Italian inflation figures are also expected later in the session, and the country’s consumer price index is expected to remain in double figures on an annual basis. 

European Central Bank President Christine Lagarde made it clear last week that the central bank will raise interest rates by another half-point next month, and with prices in the region remaining elevated, more hikes look likely.

Goldman Sachs said, in a note earlier this week, it expected the ECB to raise interest rates three times this year – in March, May, and June – taking the terminal rate to 3.5%, up from its previous 3.25% estimate.

Across the pond, the minutes from the Fed’s meeting earlier this month are expected later Wednesday, and will be studied carefully for signs on how high policymakers in the U.S. expect interest rates will climb.

Earlier in the day. the Reserve Bank of New Zealand lifted its interest rates by 50 basis points to 4.75%, its highest level since late 2008, and flagged more increases as inflation remained elevated.

In the corporate sector, Rio Tinto (LON: RIO ) stock fell 1.4% after the U.K.-listed miner more than halved its dividend while reporting a hefty drop in annual profit as iron ore prices fell on slower demand, particularly from China.

Lloyds (LON: LLOY ) stock fell 2% despite the U.K. lender raising its 2023 guidance and dividend, stating it will buy back £2 billion of stock (£1 = $1.2102). 

The bank also took a £465M charge in the final quarter of the year to cover loans that could default. This resulted in provisions against credit losses totaling over £1.5B for the whole of 2022 - a sharp contrast to 2021, when it had been able to release a net £1.38B in pandemic-era reserves.

Danone (EPA: DANO ) stock rose 2% after the French foods group reported stronger-than-expected sales growth in the last quarter of 2022, as it was able to raise prices in the face of soaring raw materials and energy costs.

Stellantis (EPA: STLAM ) stock rose 2.2% after the automaker posted a better-than-expected annual profit and announced a new share buyback program for 2023.

Oil prices drifted lower Wednesday on concerns higher interest rates will hit economic activity in the U.S., the largest consumer in the world, and thus fuel demand.

U.S. crude inventory data from the American Petroleum Institute , a day later than usual after Monday’s holiday, are due later in the session, and are expected to show another build, exacerbating the demand worries. 

By 03:40 ET, U.S. crude futures traded 1.3% lower at $75.40 a barrel, while the Brent contract fell 1.1% to $82.17. 

Additionally, gold futures traded largely unchanged at $1,842.35/oz, while EUR/USD traded flat at 1.0646.

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