Low Eurozone Inflation, Positive Q1 Market Performance Boost DAX, FTSE, CAC

Highlights

• Eurozone inflation falls sharply in March, while core inflation increases.
• Global tech stocks rise 19% in Q1 2023
• Tech stock rally contributes to positive market sentiment

Overview

The European stock markets are up late in the session on Friday as the rise in consumer prices in the euro zone slowed down, and a major U.S. inflation indicator came in below expectations.

At 14:41 GMT, Germany’s DAX traded at 15630.41, showing a rise of 108.01 or +0.70%. Meanwhile, the UK’s FTSE 100 Index stood at 7637.80, up by 17.37 or +0.23%, and France’s CAC-40 Index traded at 7326.03, a rise of 62.66 or +0.86%.

Retail stocks showed a continuation of Thursday’s rally, going up by 1.6%, while household goods showed an increase of 1.4%. Banks slipped of 0.4% despite positive momentum through the week, with Swedbank ranking among the worst-performing European stocks.

Eurozone Headline Inflation Falls Sharply in March

Preliminary readings showed that the Euro zone headline inflation fell to 6.9% in March, the sharpest fall on record, from 8.5% in February. However, core inflation, which strips out energy and food, increased from 5.6% to 5.7%.

The European Central Bank policymakers have suggested that interest rate hikes are necessary but may be slower.

In other news, German retail sales dropped, while the UK economy recorded 0.1% growth in Q4 2022, revised up from the initial estimate of no growth.

The US personal consumption expenditures price index, which is closely monitored by the Federal Reserve and investors, increased 0.3% in February, slightly lower than expected.

Global Tech Stocks Drive Positive Q1 Market Performance

Global tech stocks have risen 19% in Q1 of 2023, contributing to positive market sentiment despite concerns in the US banking sector.

The lower than expected US inflation data is helping to contribute to today’s late session gains. Low inflation will be a key factor in further market movements, with a positive result likely to benefit risk-on assets. Core inflation remains a concern, but any loosening could lead to positive ripples across major indices.

German Stock Sartorius Drops 6.8% Following Acquisition News

Sartorius Stedim, a German pharmaceutical company, saw its stocks drop by 6.8% after announcing that it will acquire French lab technology company Polyplus for 2.4 billion euros. Meanwhile, Thule Group, a Swedish company, experienced a 5.8% increase in its stocks after appointing Mattias Ankarberg, a former construction company boss, as its new president and chief executive.

Analysts Predict ECB to Cut Rates as Inflation Momentum Fades in Europe

Some analysts believe that inflation momentum is fading away in Europe due to decreasing pricing dynamics, muted wage increases, and the resolution of the energy crisis. They predict that the European Central Bank will need to shift to rate cuts during the summer, despite their current stance. The analysts also warn that the real economy is delicate and the ECB will face significant pressure.

This is potentially bullish for European stocks.