Inflation Data Boosts European Markets; Stoxx 600 Rises 1%

European stock markets rose on Wednesday as inflation figures from France and Germany showed that consumer prices in the euro zone are decelerating.

At midday, the Stoxx 600, which covers Europe, was up 1.2%. Retail stocks were the biggest gainers, rising 2.4%, while most other sectors and major markets were in the green. Oil and gas stocks, however, dropped 2.2%

.Investors are keeping an eye on the upcoming release of U.S. economic figures as well as the minutes from the Federal Reserve's most recent policy gathering.

Investors around the world will be eager to gain insight into the Federal Reserve's views on interest rates and the overall condition of the American economy.

In the United States, two economic indicators will be released: the Job Openings and Labor Turnover Survey (JOLTS) and the Institute for Supply Management (ISM) manufacturing data.

On Tuesday, European markets ended the day on a positive note due to the release of lower-than-expected inflation figures from Germany, which dropped to 9.6% year on year. France also provided a pleasant surprise when its inflation rate decreased to 6.7% in December from the previous month's record high of 7.1%.

Seema Shah, the Chief Strategist at Principal Global Investors, anticipates a difficult beginning to 2023 for the U.K. due to a decrease in household savings and the repercussions of rate increases.

Figures released Wednesday morning indicated that inflation in France had decreased to 6.7% in December, down from the previous month's all-time high of 7.1%.

Economists surveyed by Reuters predicted that harmonized inflation, which is adjusted to make it easier to compare across the euro area, would be 7.2% year-over-year.

The largest decrease was seen in the energy sector, with prices increasing by 15.1% year-over-year, a decrease from the 18.4% reported in November.

Inflation has been slowing more than anticipated in Germany and Spain. On Tuesday, Germany reported a decrease in HICP to 9.6% from 11.3%, while Spain reported a drop to 5.8% from 6.7% last week.

Analysts are examining whether inflation has reached its peak in the major economies of the euro zone, and if this will have an effect on the European Central Bank's decision to raise interest rates "significantly".

ING analysts noted that achieving significantly lower inflation rates would be difficult and would depend on the energy sector and agricultural issues that affect food costs.

The recent inflation numbers from Germany are not a cause for celebration, but rather a reminder that inflation in the eurozone is largely driven by energy prices. The European Central Bank will not make policy decisions based on the volatile energy market.

On Thursday, Italy will release its inflation data, followed by a preliminary estimate of the euro area's inflation rate on Friday.

According to the Swiss Federal Statistical Office, consumer prices in Switzerland increased by 2.8% compared to the same time last year in December, and decreased by 0.2% from the previous month.

In 2022, Swiss inflation was recorded at an average of 2.8%, a significant increase from the 0.6% seen in 2021. This rise was attributed to higher costs for petroleum products, gas, cars, and house rentals, which counteracted the price drops for medicines and fixed-line and mobile communication.

Swiss energy provider BKW saw a 6% increase in its stock price at the start of trading, leading the Stoxx 600, after forecasting an "exceptional" outcome for the 2022 fiscal year.

Tenaris, a steel pipe manufacturer based in Italy, experienced a 5% drop in its stock price, causing it to be the lowest-ranked company on the European blue chip index.

The dramatic increase in energy prices has caused a surge in investments in renewable energy sources around the globe.

UBS, a Swiss investment bank, has identified 10 leading renewable energy companies that are likely to experience success in the coming year. These businesses are taking advantage of the current trend in the industry.

In 2022, the chip sector experienced a downturn, but investors on Wall Street appear to be more hopeful about semiconductor stocks for the upcoming year.

Recently, experts in the investment sector have suggested that investors should look at the chip industry from a long-term perspective due to its significance in various ongoing trends.

Experts have expressed optimism about a certain stock, citing its potential to generate earnings and its future profitability.

Goldman Sachs has a prediction for the U.S. economy in 2023 that is different from what most people are expecting.

Analysts reported on Tuesday that economists remain confident that the US will not experience a recession as the Federal Reserve works to bring the economy to a gentle stop.

Our outlook is slightly different from the majority opinion, as we believe that a period of slower than usual growth will be enough to bring the labor market back into balance and reduce inflationary pressures. Additionally, our research suggests that the negative effects of fiscal and monetary policy changes will be much less severe in the coming year, which is contrary to the consensus view that a recession will occur in 2023 due to the delayed effects of interest rate increases.

The bank has increased its prediction for fourth quarter 2022 Gross Domestic Product (GDP) growth by 10 basis points to +2.1% due to the unexpectedly strong November Construction Spending report.

Goldman noted that the contrast between the US economy's strength in 2022 and the decline of stocks has been a major theme of the past year. It remains to be seen if this discrepancy will continue, if the economy will follow the market's downturn, or if the market will recover with the economy's soft landing in 2023.

In 2022, the stock market experienced a difficult year, with major indexes recording their worst performances in over ten years.

European stock markets are expected to open higher on Wednesday as investors anticipate the release of the latest U.S. Federal Reserve minutes. They are hoping to gain insight into whether or not more interest rate hikes are on the horizon.

Analysts at IG anticipate that the FTSE 100 index in the U.K. will open 11 points higher at 7,570, the DAX in Germany 28 points higher at 14,227, the CAC in France 9 points higher at 6,643, and the FTSE MIB in Italy 31 points higher at 24,449.

On Tuesday, European markets ended the day on a positive note due to Germany's inflation rate for December being lower than anticipated, dropping to 9.6% year over year. Investors are now awaiting France's inflation figures, which are due to be released on Wednesday.