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European Stocks Rise in Anticipation of U.S. Inflation Data

The Bank of France has announced that the French economy is likely to have seen a small amount of growth in the final quarter of last year. This is thanks to an increase in business activity following refinery strikes in October, and more nuclear plants coming back online.

January 11, 2023
8 minutes
minute read

European markets closed higher as investors awaited more inflation data this week. U.S. consumer price data for December is due Thursday.
The pan-European Stoxx 600 index closed up 0.4% on most sectors and bourses. Retail stocks had the largest uptick at 2%, while insurance was down 1.1%.
U.S. Federal Reserve Chairman Jerome Powell on Tuesday emphasized the need for the central bank to be free of political influence while it tackles persistently high inflation. Powell said that the Fed needs to be able to make decisions based on economic data, without interference from politicians. This independence is critical to the Fed's ability to effectively manage inflation.

In a speech delivered to Sweden's Riksbank, Powell noted that stabilizing prices requires making tough decisions that can be politically unpopular. The speech did not contain any direct clues about where policy is headed for a Fed that raised interest rates seven times in 2020, and has indicated that more increases are likely this year.
U.S. stock futures were higher on Wednesday as the Nasdaq looked to extend its three-day winning streak.
Asian-Pacific shares traded higher on Thursday as investors looked ahead to the release of U.S. consumer price index data.The data is closely watched by investors as it provides insight into inflationary pressures in the world's largest economy.

The Stoxx 600 index ended the session 0.4% higher, regaining most of the ground it lost Tuesday and putting it back near its eight-month high. This is a positive development for Europe, as the index is now closer to its all-time high.

Retail stocks led the way with a 2.2% gain, followed by financial services and chemicals, both up over 1%.
Germany's DAX index climbed to its highest level in nearly five months on Wednesday, as investors bet on the country's economic recovery.The DAX index rose 1.2% to 13,738.79, its highest level since February. Optimism about Germany's production and growth prospects for the year has been growing in recent weeks, helping to drive the index higher.However, some analysts cautioned that the country's economic recovery could be derailed by a second wave of coronavirus infections.
Wacker Chemie, a German chemicals company, was up 8.8% in late afternoon trade after UBS analysts said it should outperform average analyst estimates in the next quarter. The analysts also reiterated a “buy” rating on the stock.

Aroundtown, a European real estate developer, was joined at the top of the Stoxx 600 index by 8% today. Aroundtown is up 21.5% this year, though it remains down by around a half on a one-year basis.
Direct Line, a U.K. insurer, was the worst performer on the stock market today, plunging 24%. The company announced that it would not be paying a final dividend for 2022. This follows a surge in December claims due to bad weather, inflation, and supply chain issues, which has resulted in an underwriting loss for the year.
The markets opened higher on Wednesday, continuing the rally that began in early 2023.

The Dow Jones Industrial Average rose 0.4% on Wednesday, while the S&P 500 and Nasdaq Composite both gained 0.5% and 0.6%, respectively.
All three indexes closed the prior session trading in positive territory.
U.K. government bond yields fell sharply, hitting their lowest level since December 19. This is a significant drop, and it indicates that investors are becoming increasingly worried about the state of the economy.

At 2:15 p.m. London time, yields on 10-year, 20-year and 30-year gilts were all down around 15 basis points.
As prices increase, yields decrease.
According to Roger Lee, head of U.K. equity strategy at Investec, the market is so certain that a recession is coming that if it doesn't materialize, it could be a real risk for U.K. equities.

LVMH chairman and CEO Bernard Arnault has announced a new leadership team for his luxury goods empire, with his daughter Delphine taking over as head of the Christian Dior brand. This marks a significant change for the company, which has been led by a number of high-profile figures in recent years. Delphine Arnault is a respected businesswoman in her own right, and her appointment is sure to bring a new era of success for the Dior brand.
Pietro Beccari, the former head of Dior, will replace Michael Burke as the CEO of Louis Vuitton. Burke has been with the company for a long time, but Beccari's experience with high-end fashion brands makes him a good fit for the position.
"Both are well respected; logical promotions within the group," Credit Suisse analyst Natasha Brilliant told Reuters. "This is a positive development for the company, and we believe it will help to drive continued growth."

LVMH is Europe's most valuable company at 380 billion euros ($408 billion), according to Reuters. Shares of the company rose as much as 2% to hit new highs on news of the leadership reshuffle.
According to European Central Bank policymaker Robert Holzmann, there are no signs that market expectations on inflation are de-anchored.
At a Euromoney conference on Central and Eastern Europe, a slide featured a statement alongside a speech.
In a recent presentation, Holzmann noted that policy interest rates will need to rise significantly in order to reach levels that are restrictive enough to ensure a timely return of inflation to the 2% medium-term target.

Bank of France head Francois Villeroy de Galhau said Wednesday that the French economy is resisting better than expected and should be able to avoid a "hard landing." This is good news for the French economy, which has been struggling in recent years.
"Activity in France is showing better than expected resistance," Villeroy told Radio Classique.

The Bank of France has announced that the French economy is likely to have seen a small amount of growth in the final quarter of last year. This is thanks to an increase in business activity following refinery strikes in October, and more nuclear plants coming back online.
Direct Line's shares fell 29% after the company announced it was scrapping its final dividend for 2022. This is on track to be the biggest one-day drop in the company's history.

The company said that it had seen an increase in claims during a period of bad weather in Britain in December, which led to an underwriting loss for the year.
According to Direct Line, inflationary pressures and supply chain issues have made vehicle repairs more expensive, while unexpected hot and cold weather spells have increased demand.

"We understand how important the dividend is to our shareholders, and we're committed to taking steps to restore our balance sheet and dividend capacity," CEO Penny James said in a statement. "We have a track record of delivering returns for shareholders, and we're committed to continuing that."
According to Koyfin data, the fund has offered investors a 14% compounded annual growth rate over the same period, which is significantly more than broader index tracking funds.

Cryptocurrencies rose slightly after Coinbase, a major crypto company, announced plans to lay off 20% of its workforce. The move is intended to help the company conserve cash during the current market downturn.
According to Coin Metrics, Bitcoin last traded at $17,459.63, up 1.55%. Ether also gained 1% to reach $1,337.85.
Other digital coins like Cronos and Cardano also saw significant gains.

CEO Brian Armstrong said that the only way to reduce expenses and increase the company's chances of success in all scenarios is to reduce the number of employees.
It was a tough year for investors, as stocks and bonds both fell amid broader market turmoil.

Citi has suggested that now is the time to invest cash, rather than simply holding onto it for safety. The company has named two ways to deploy cash for higher returns.
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Coinbase's stock rose 6% after the company announced plans to cut 20% of its workforce in an effort to reduce costs.
The 950 layoffs at Coinbase come after the company cut 18% of its workforce in June. Coinbase has said that it grew too quickly during the bull market and that it is preparing for a potential recession and crypto winter.

Crypto markets have come under pressure following the collapse of FTX, one of the industry’s largest operators. The company has been struggling to stay afloat after a series of bad bets and losses, and its collapse has sent shockwaves through the industry. Many other companies are now facing increased scrutiny and pressure, as investors worry about the stability of the sector.

Coinbase has announced that it will be laying off a number of employees in order to reduce operating expenses by 25% for the quarter ending in March. This was revealed in a new regulatory filing.
European markets are set to open higher as investors await more inflation data later this week. U.S. consumer price data for December is due Thursday.
According to data from IG, the U.K.'s FTSE 100 index is expected to open 26 points higher at 7,720, Germany's DAX 73 points higher at 14,848, France's CAC up 29 points at 6,898, and Italy's FTSE MIB up 109 points at 25,474.
The release of Russian inflation data for December and earnings from British supermarket Sainsbury's is upcoming.

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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