The pan-European Stoxx 600 was down another 0.04% by Friday’s close, with travel stocks leading losses.
The benchmark has shed 1% over the last week.
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Jean-Jacques Morin, Deputy CEO of Accor, discusses the firm’s profit guidance raise and why he is not worried about China in the long term.
Another downside surprise on inflation next week will raise the risk of a 50 basis point rate cut by the European Central Bank in December, according to Andrzej Szczepaniak, vice president of European Economics at Nomura.
“In terms of the September inflation print, that spooked the ECB, that surprised them materially to the downside. They were expecting 2% to 2.2%, it came in at 1.7%,” Szczepaniak told CNBC’s “Street Signs Europe.”
Euro zone economic growth figures are due on Oct. 30, followed by a flash October inflation print on Oct. 31.
Szczepaniak forecasts the inflation figure to come in at 2%, while consensus analyst expectation is for 1.9% and the ECB’s own expectation is around 2.2%, he said.
European Central Bank (ECB) President Christine Lagarde speaks to reporters following the Governing Council’s monetary policy meeting in Frankfurt, Germany September 12, 2024.
Jana Rodenbusch | Reuters
If the print is 1.9% or above then that would indicate another 25 basis rate cut in December, he said. But a figure around 1.7% would be “a material downside surprise, not just to the ECB but also to analysts, and that could obviously increase the likelihood of a 50 [basis point cut],” he added.
Between now and the December meeting, the ECB will also have the GDP data, November inflation data and November purchasing managers’ index figures, he noted.
“If all of those data show deterioration or weaker inflation, much weaker versus analyst and ECB expectations, that will certainly raise the risk of a 50 [basis point cut].”
Russia’s central bank raised its key interest rate to 21% from 19%, citing higher-than-forecast consumer price increases and warning of ongoing high inflation risks in the medium term.
The institution noted annual inflation of 8.4% as of Oct. 21 and now anticipates the print will sit in a 8.0–8.5% range by the end of 2024.
— Ruxandra Iordache
Yves Bonzon, chief investment officer at Julius Baer, says the current valuation of the U.S. market reflects the high ray of confidence in a “pretty benign” outcome for the economy over the next few quarters.
German business confidence improved slightly in October, according to a survey from the country’s Ifo Institute, coming after four straight declines.
“Companies were more satisfied with their current situation. Expectations were brighter but marked by skepticism. The German economy stopped the decline for the time being,” the Ifo said.
However, in the country’s struggling manufacturing sector, businesses were less pessimistic about the future but viewed their current situation as markedly worse, noting a lack of new orders.
— Jenni Reid
NatWest shares rose 4.3% to their highest level since 2015 after the British bank reported sharply higher third-quarter profit and raised its full-year outlook.
The lender reported attributable net profit of £1.17 ($1.52 billion) for the period, up from £866 million the previous year. Analysts expected net profit of around £990 million, according to a company-compiled consensus.
Return on tangible equity rose quarter on quarter to 17% from 16.4%, while its Common Equity Tier 1 ratio, a measure of financial strength, rose 30 basis points to 13.9%.
NatWest share price.
NatWest said it now expects to achieve a return on tangible equity above 15% for the full year, from a prior forecast of 14%, and for income excluding notable items to be around £14.4 billion, up from £14 billion. It attributed this to “interest rates and economic activity.”
The bank has seen higher net loans, with particular growth in commercial and institutional customers, along with its acquisition this summer of Metro Bank’s £2.3 billion mortgage portfolio.
Its British rivals Barclays and Lloyds Bank Group also this week beat profit expectations for the third quarter.
“Better income and costs drove the beat today, offset by higher impairments than expected, which does buck the trend we saw from Lloyds and Barclays. That said, default levels remain low at NatWest and that bodes well for performance over the medium term,” Matt Britzman, senior equity analyst at Hargreaves Lansdown, said in a note.
— Jenni Reid
Mercedes share price.
Mercedes shares opened 3.2% lower after the German firm reported a sharp profit decline in its core cars division for the third quarter amid increasing competition in China.
Earnings before interest and taxes (EBIT) at Mercedes-Benz Cars fell 64% year-on-year to 1.198 billion euros ($1.296 billion) as revenue slipped 6%. Group EBIT was 48% lower.
The company said that within the cars unit, “weaker macroeconomic conditions and fierce competition, mainly in Asia, outweighed improved product availability.”
It had already issued a profit warning last month.
Germany’s famed automakers are attempting to transition into electric vehicles while facing a weak domestic economy and waning demand in China, the world’s largest car market.
— Jenni Reid
Stoxx 600 index.
European markets are seen opening mixed on Friday, according to IG data.
Germany’s DAX is set to open 33 points lower at 19,416, with France’s CAC 40 down 11 points at 7,497. The U.K.’s FTSE 100 is seen heading for a cautiously brighter start, up 5 points at 8,279, along with Italy’s MIB, seen up 20 points 34,544.
— Jenni Reid
As corporate giants report their quarterly finances in the coming days, one investment bank has suggested that investors bet against two Big Tech stocks.
CNBC Pro subscribers can read more about why the analyst is telling clients to short Apple and Amazon here.
— Ganesh Rao
China’s central bank kept the interest rate on medium-term loans to banks unchanged at 2%, according to the bank’s statement on Friday.
The People’s Bank of China issued 700 billion yuan ($98.36 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions at 2%, to “maintain sufficient amount of liquidity in the banking system.”
The bid rates in Friday’s operation ranged from 1.9% to 2.3%, and the total balance of MLF loans now stands at 6.789 trillion yuan, the central bank said.
— Anniek Bao
The electricity industry is transforming, according to Morgan Stanley, and multiple power producers, grid operators and utilities are set to benefit.
“Power demand is booming, prices are inflecting, and cost to produce clean power has fallen by a third around the world since 2023, and more so in Asia,” the investment bank’s analysts outlined in an Oct. 23 note.
“Global power markets have surprised on multiple fronts, and investors are navigating a new normal in the power value chain,” they added.
Morgan Stanley’s analysts named three overweight-rated global stocks in the electricity sector which they give more than 40% potential upside.
CNBC Pro subscribers can read more here.
— Amala Balakrishner