Business sentiment in Germany ticked up for the first time in a half of a year, a rare positive sign for Europe’s largest economy after struggling to create growth this year. Despite the favourable data point out of Germany on Wednesday, recent Purchasing Managers’ Indices (PMI) out of Europe earlier in the week were weak and other recent indicators have been poor. That has led investors to believe the European Central Bank will end its interest rate hiking cycle when it announces its monetary policy decision later Thursday.
Germany’s ifo Business Climate Index came in at 86.9 points, up from a reading of 85.8 in September. That level is still very low, but the survey participants were less pessimistic about the situation in the coming months. The ifo data comes in contrast to other macroeconomic data out of Germany, such as Composite PMI released a day earlier that fell for a fourth month in a row. Germany has been struggling to produce economic growth this year after slipping into a recession late in 2022 and the signs are mounting that it may be in for a double-dip recession this year. Germany’s DAX made a mild gain of 0.1% and the Euro Stoxx 50 increased 0.2% on Wednesday.
In New York, stock indices stock fell midweek with tech stocks leading losses. The Dow Jones Industrial lost 0.3% and the S&P 500 fell 1.4%. The Nasdaq-100 plummeted 2.5% after the cloud business of Google parent Alphabet disappointed investors. The effect of the positive earnings report from Microsoft wasn’t strong enough to prop up the indices on the Nasdaq. Alphabet shares fell nearly 10% while Microsoft gained more than 3.1%. Other than Microsoft, Big Tech stocks were down across the board. Meta stock fell 4.1% during Wednesday’s session and were down another 3.4% in after-hours trading despite the social media giant reporting quarterly results that beat market expectations. Tech earnings continue with Amazon on Thursday.
Looking beyond tech, Deutsche Bank confirmed the trend in the banking sector with third-quarter profit under pressure due to low investment banking revenue. Operating performance at the corporate banking division was solid, however, and shares of Germany’s largest lender shot up more than 7% on Wednesday.
The risk-off appetite went beyond Wall Street midweek with the US dollar making gains against other major currencies, the 10-year Treasury yield approaching 5% and gold moving towards 2000 US dollars per ounce.
In the Asia-Pacific region, a sell-off was underway across major indices on Thursday. South Korea’s Kospi was the biggest regional loser, trading 2.7% lower, after South Korean chip supplier SK Hynix reported a 1.6-billion-US-dollar loss for the third quarter. In Tokyo, the Nikkei 225 dropped 2.1%. In Australia, the S&P/ASX 200 closed 0.6% lower. Hong Kong's Hang Seng Index lost 0.5%, while the Shanghai Composite was roughly flat.
Corporate news in focus: Quarterly figures from Mercedes-Benz Group AG, BNP Paribas, Volkswagen, Schneider Electric, Danone, Saab, TotalEnergies. Unilever, Standard Chartered, Linde, UPS, Merck & Co, Vinci, Ford, Intel, Amazon, Bristol Myers Squibb, Mastercard.
Economic data in focus: Spanish unemployment rate (09:00 CET), European Central Bank interest rate decision (14:15), US gross domestic product (14:30), US durable goods orders (14:30), US weekly initial jobless claims (14:30), US existing home sales (16:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.