On Thursday, major European markets concluded slightly higher due to an influx of U.S. and European economic data, and the announcement of the European Central Bank's (ECB) monetary policy. Despite spending much of the session in the red, most regional markets found some late-day support leading to a marginal net positive.
The ECB maintained steady interest rates for the third consecutive policy discussion. The governing council, headed by ECB President Christine Lagarde, decided to persist with the restrictive policy approach for as long as necessary, offering no hints of immediate rate reduction. The primary refinancing rate held steady at 4.5% in the year's first rate-setting session, while the deposit facility rate remained at a record high of 4% and the lending rate at 4.75%.
President Lagarde suggested the possibility of discussing rate cuts once there is substantial evidence of inflation converging towards the 2% target mark for the currency bloc. Market experts believe the ECB may initiate an easing cycle by mid-year, as signs of decelerating inflation are beginning to surface.
Region-wide, the Stoxx 600 rose by 0.3%. The UK's FTSE 100 increased marginally by 0.03%, while Germany's DAX and France's CAC 40 each advanced by around 0.1%. Meanwhile, Switzerland's SMI creeped up 0.11%. Other European markets had mixed outcomes; Austria, Denmark, Finland, Ireland, the Netherlands, Sweden, and Turkey saw gains, while Greece, Iceland, Poland, Portugal, Russia, and Spain exhibited weakness. Belgium and Norway kept a status quo.
In the UK market, ICP saw over a 7.5% increase, and Ashtead and Smurfit Kappa Group gained about 7.2% and 4.5%, respectively. Elsewhere in Germany, Adidas surged by 5.3%, and Symrise and BASF rose around 2.8% and 2.4%. Paris saw gains from Publicis Groupe, Airbus Group, Edenred, and Capgemini.
Recent findings from the Munich-based ifo Institute indicated unprecedented weakening in Germany's business morale - the lowest since summer 2020 – primarily influenced by train strikes and Red Sea re-routing induced supply chain problems. France's manufacturing sector revealed stable confidence for the third consecutive month despite some shifts in production outlook and past production sentiments.
In the UK, the car production sector experienced notable growth in 2023 with increased resolution of supply chain hurdles and expansion of electric vehicles. The Society of Motor Manufacturers and Traders (SMMT) data showed an annual rise of 16.8% in total car production, marking the best growth rate since 2010. However, the Confederation of British Industry reported a rapid decline in retail sales volume in January 2023, falling 18 points to -50 - the fastest drop since January 2021.
