Thứ hai Oct 2 2023 07:09
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European stocks rose in the last day of September trading, with Frankfurt's DAX 40 climbing by 1.15% to reach 15,500 points, and the pan-European STOXX 600 registering an approximate 1% increase to reach 453 points following the release of key inflation figures from the Eurozone. Italy’s FTSE MIB climbed 0.85% to hover around the 28,400 level.
The most recent Consumer Price Index (CPI) report indicated that inflation in the 20 eurozone countries decelerated more than anticipated, falling to 4.3% in September. This marked the lowest rate since October 2021, and the core inflation rate dropped to its lowest level in over a year, settling at 4.5%.
These data points suggested that the previously high inflationary pressures were showing signs of abating — although both rates remained well above the European Central Bank's (ECB) 2% target.
Despite the gains observed on Friday, the DAX 40 was set to conclude September with a notable decline of close to 2.4%. This fall was driven by concerns that interest rates would remain elevated for an extended period of time, as central banks are increasingly voicing their support for the “higher for longer” policy stance. Similarly, the STOXX 600 was also on course to finish the month with a loss exceeding 1%.
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In September, the European Central Bank (ECB) increased interest rates for the tenth consecutive time. This marks the most recent step in a sequence of rate hikes that have taken rates from -0.5% to 4% in a mere 14 months.
Although European stock markets did well in the first few months of the year, there are signs that has fizzled out and the interest rate rises seen so far are already starting to bite.
Hargreaves Lansdown Senior Investment Analyst Joseph Hill summarized the developments:
“The theme in Europe is now one of slowing growth. This month, the European Commission announced it expects the economy to grow less than they originally thought back in May of this year.
It predicted 1% growth in 2023, but now think growth of 0.8% is more likely. And it’s a similar story for 2024, dropping its growth prediction from 1.7% to 1.4%. This means the economy might not recover as quickly as it had initially hoped.
Germany continues to be a spot of weakness for the bloc. It didn't grow at all in the second quarter of this year and shrunk in the two quarters before that. In fact, for 2023 it’s expected to be the only major European economy to shrink in size to the tune of -0.4%.”
“The higher-for-longer narrative remains the dominant driver,” Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital told BNN Bloomberg, referring to interest rate prospects. He reckons, however, that markets are overpricing the chance of further U.S. and euro zone rate hikes for this year.
The most recent inflation data is expected to reinforce the belief that the European Central Bank is more likely to halt its series of interest rate hikes, which have threatened to significantly slow down economies across Europe.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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