European stocks rise after German confidence rises

European stocks rose on Thursday after a better-than-expected report on German business confidence boosted investors’ hopes of a milder deceleration in the region’s largest economy.

The Stoxx Europe 600 regional index was 0.3% higher in the early afternoon, extending a streak of activity that saw the benchmark index rise more than 9% last month. London’s FTSE 100 rose 0.1%. US markets are closed for Thanksgiving.

Germany’s Dax index rose 0.6 percent after the latest Ifo Institute index showed confidence among 9,000 companies rose to 86.3 in November from 84.5 in October, ahead of a poll of Reuters forecast 85.

“Markets are currently pricing in recession times in Germany, just as the data points to a more bullish scenario,” said Agnès Belaisch, chief European strategist at Barings Investment Institute.

“This makes the job of the European Central Bank a lot more complicated,” added Belaisch. “It must continue to tighten financial conditions to guide inflation expectations and wage payments downward, just as the economy shows some nascent signs of recovery from a tough shock.”

Equity investors were also boosted by overnight gains on Wall Street, after the minutes of the Fed’s November meeting revealed that officials believe their policy of tightening interest rates is beginning to have an end. results in the fight against inflation.

“Financial conditions have tightened significantly in response to the Commission’s policy actions, and their impact is evident in the most interest-rate sensitive sectors of the economy,” the margin said. version shows.

The central bank has raised interest rates by 0.75% four times in a row. Steven Blitz, chief US economist at TS Lombard, said the Fed “is ready, ready, anxious to slow down the pace of rate hikes because they still believe they can slow inflation without creating a recession.” recession and an increase in the unemployment rate”. rallies in December. The Fed “will regret it if they don’t,” he added.

Stock investors ignored the news that the spread between the yields on two-year and 10-year German government bonds had reached its highest level since 1993.

Long-term debt is often more profitable than short-term debt to compensate investors for the risk of inflation eating into their returns. The so-called “inversion” of the yield curve, when the opposite occurs, usually precedes recessions.

Line chart of difference in two-year and 10-year Bund yields (percentage points) showing German yield curve 'inverted' highlighting economic concerns

The German yield curve inverted for the first time in 29 years in early November, although the spread between the two grades narrowed slightly on Thursday. The two-year yield fell 0.1 percentage points to 2.03% and the 10-year yield fell 0.11 percentage point to 1.8%. Output decreases as price increases.

In Asia, Hong Kong’s Hang Seng index rose 0.8% and Japan’s Topix gained 1.2%.


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