European Markets Tread Cautiously as Investors Weigh Uncertain Economic Outlook

European markets were mixed on Monday as investors reassessed the economic outlook.
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The Stoxx 600 was up 0.2% in early afternoon trading, with tech stocks adding 1.5% while chemicals slid 0.5%.
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Last week's economic data, including a decline in wholesale prices and retail sales, has led many to believe that the Federal Reserve may soon start to slow the pace of its inflation-fighting rate hikes. This potential change in policy has been a major topic of discussion in global markets.
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On Friday, Fed Gov. Christopher Waller said he favors just a quarter-point hike on Feb. 1, when the central bank gives its next interest rate policy update. Waller also said that rates are already high enough to be slowing the economy.
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Kristalina Georgieva, managing director of the IMF, said Friday at the World Economic Forum that the global economic outlook is not as bad as feared a couple of months ago. However, she cautioned that the outlook is still not good.
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"We need to be careful," she said on a closing panel at the World Economic Forum in Davos moderated by CNBC.
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U.S. stock futures were little changed Monday morning while shares were higher in Asia overnight. However, most markets in the region are closed for the Lunar New Year holiday, with markets in Shanghai shut for the whole week.
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Daniel Morris, chief market strategist at BNP Paribas, says that bond markets could be an attractive investment this year, while equity markets could see further declines.
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Charlie White-Thomson, CEO of Saxo Markets U.K., discusses his outlook for inflation in Britain, and how this is impacting consumers and corporates. He notes that inflation has been rising steadily in recent months, and that this is likely to continue in the short to medium term. This is putting pressure on consumers, who are seeing their purchasing power eroded, and on businesses, which are having to raise prices to maintain their margins. White-Thomson expects the Bank of England to raise interest rates in response to inflation, which will further increase the cost of borrowing for consumers and businesses.
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Symrise shares fell sharply in early trading after the company missed full-year earnings expectations. The stock was the biggest decliner on the Stoxx 600 index.
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Citigroup upgraded Remy Cointreau's stock to "buy" from "neutral" and raised its target price, sending the French liquor company's shares up 3%.
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Kristalina Georgieva, managing director of the IMF, said Friday at the World Economic Forum that the global economic outlook is not as bad as feared a couple of months ago. However, she cautioned that the outlook is still not good.
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"We need to be careful," she said on a closing panel at the World Economic Forum in Davos moderated by CNBC.
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She said that headline inflation is going down and that China's reopening is expected to boost global growth. The IMF is forecasting that China's economy will outpace global growth of 2.7% this year, at 4.4%. This would be after slipping below global growth for the first time in four decades last year.
Software stocks were popular during the pandemic, but their popularity has declined as economies have reopened.
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Despite recent challenges, the tech sector remains a key part of several long-term secular trends, such as cloud computing and artificial intelligence. These trends are expected to continue to drive growth in the sector over the long term.
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European markets are set to open higher on Monday.
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According to data from IG, the U.K.'s FTSE 100 index is expected to open 15 points higher at 7,781, Germany's DAX 80 points higher at 15,106, France's CAC up 25 points at 7,017 and Italy's FTSE MIB up 121 points at 25,830.
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There are no major data or earnings releases scheduled for Monday.
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As 2023 approaches, investors are becoming increasingly pessimistic and are investing more heavily in companies with large cash reserves. This strategy provides a measure of security in case of an economic downturn, as these companies will be better equipped to weather the storm.
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The recent launch of Microsoft-backed ChatGPT has set the internet abuzz, and its popularity might be prompting investors to wonder what it means for Google parent Alphabet.
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Analysts say that ChatGPT, a chatbot created by San Francisco-based OpenAI, could pose a threat to Google's core search business. ChatGPT is able to answer questions and write essays, which could make it a formidable competitor to Google in the future.
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Both tech giants compete in the cloud business.