European markets rise as investors watch inflation and interest rates

European Markets Advanced on Friday, Building on Gains from the Previous Session to Notch their Highest Level since April 2022. The Rally Was Driven by Optimism Around the Global Economic Recovery and Positive Corporate Earnings.

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The Stoxx 600 was up 0.2% in early afternoon trade, paring earlier gains. Healthcare stocks added 1% to lead gains while autos dropped 1.8%.
The European blue chip index closed up 0.7% at 450.22 points on Thursday, its highest point since April 2022. The index was choppy following the latest U.S. inflation print.

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The December consumer price index report showed a monthly dip of 0.1%, in line with economist expectations. However, consumer prices rose 6.5% year over year, compared with a 0.1% monthly gain in November and an annual rise of 7.1%. Investors are keeping a close eye on inflation data for clues about how long and how far central banks will tighten monetary policy.

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In a speech on Thursday, Federal Reserve Bank of Philadelphia President Ed Harker suggested that substantial interest rate hikes are now in the rearview, with inflation seemingly past its peak. He indicated that while the Federal Reserve will need to continue hiking rates, it could do so in 25 basis point increments at future meetings.
Shares in Asia-Pacific were mostly higher on Friday, though Japan’s Nikkei 225 slumped 1.25%. Uniqlo owner Fast Retailing was among the biggest decliners, dragging down the index. Food and electronics stocks also weighed on the market.

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In the U.S., stock futures were slightly lower in early premarket trading on Friday ahead of a suite of big bank earnings. JPMorgan Chase, Wells Fargo, Citigroup and Bank of America are all due to report before the bell on Wall Street. According to figures published Friday, the German gross domestic product rose 1.9% for the full year 2022. This is good news for the German economy, which has been struggling in recent years.

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Ruth Brand, president of the Federal Statistical Office, said that Berlin's economy had been impacted by a number of factors, including the war in Ukraine, energy price increases, material shortages, delivery bottlenecks, food price inflation, and a tight labor market.
"Despite these challenging conditions, the German economy as a whole managed to perform well in 2022," she said.
The German economy is expected to grow by 0.7% in 2022, compared to 2019, before the Covid-19 pandemic began. This is a positive sign for the country's recovery from the pandemic.

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According to Amos Hochstein, the Group of Seven's oil price cap scheme is working well so far. The scheme is designed to limit Russian oil export revenues, and Hochstein is the special presidential coordinator to President Joe Biden. "The oil price cap has, so far, achieved our goal of maintaining a steady supply of oil on the market to support economic growth," said UAE Energy Minister Suhail al-Mazrouei. "However, there is still a long way to go."
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Fred Kempe, president and CEO of the Atlantic Council, discusses the COP28 climate conference and the 2023 energy outlook. He notes that the conference is an important opportunity for world leaders to come together and address the challenges of climate change. He also highlights the need for a global transition to clean energy, and outlines some of the challenges and opportunities that will arise in this transition.

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Kindred Group's shares fell more than 17% in early trading on Tuesday, dragging the company to the bottom of the Stoxx 600 index. The Maltese-based online gambling company issued a profit warning for the fourth quarter, citing increased regulatory pressures in several key markets.
Shares of Germany's United Internet climbed 4% on reports that its web hosting unit Ionos might begin the IPO process before the end of the month. This news comes at the top of the index, and investors are clearly bullish on the prospects for the company.

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The UK's GDP grew by 0.1% in November, according to data from the Office for National Statistics. This was unexpected by economists, and reduces the likelihood that the economy entered a technical recession in the fourth quarter. A poll of economists conducted by Reuters had forecast a 0.2% contraction in the British economy, amid a generally bleak outlook.

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However, the most recent GDP figures show that the economy shrank by 0.3% in the three months to the end of November. This indicates that the recession may simply be delayed rather than averted. The Bank of England has projected that the U.K. economy will experience at least a four-quarter recession, its longest on record.
"The data from today makes it clear that we are likely in for a recession, even if it is a relatively shallow one," said Jeremy Batstone-Carr, European strategist at Raymond James.

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The Bank's monetary tightening is still having an impact on the economy, and this is likely to continue as the corporation tax increase to 25% takes effect and the tax reduction on new investments expires. This is likely to lead to further economic contraction. Britain's FTSE 100 is expected to open around 15 points higher at 7,809, while Germany's DAX is seen gaining around 21 points to 15,079. France's CAC 40 is also set to open up by around 15 points at 6,991.

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The Bank of Korea raised interest rates by 25 basis points to 3.5%, which is the highest since December 2008. This move was what Reuters had expected.
The Bank of Korea stated that an additional 25 basis points hike is warranted to ensure price stability, as inflation still remains high and is projected to be above the target level for a considerable time.

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Governor Rhee Chang-yong said in a press conference that fourth-quarter GDP for 2022 is likely to be negative, but estimated that 2023′s first quarter GDP growth could improve.

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"Today's hike by the Bank of Korea (BoK) marks the end of the current tightening cycle, but the hurdle for a pivot towards an easing bias remains high," ANZ Research's economist Krystal Tan wrote in a note.

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According to one fund manager who has outperformed the market, investors looking for recession-proof stocks should consider buying shares in a renewable energy producer and a cyber security firm. Trent Masters, of investment management firm Alphinity, named the stocks. He said that while the energy company can raise prices above inflation even during a recession, the cyber security firm will see increased demand for its services this year.