Europe close: Stocks finish higher after a quiet session

By Benjamin Chiou

Date: Thursday 23 Nov 2023

(Sharecast News) - A host of better-than-expected economic data lifted stocks higher on Thursday, though gains were limited due to a lack of catalysts coming from Wall Street.
David Morrison, analyst at Trade Nation, said: "Investors are lacking the direction they get from a fully functioning US market, due to the Thanksgiving holiday which means thin trade until next week."

The Stoxx 600 finished 0.27% higher by the close, with most major indices across the continent putting in gains of between 0.2% and 0.3%.

Markets gave a relatively muted reaction to minutes from the latest European Central Bank policy meeting, released at lunchtime. The minutes showed that policymakers were content with the recent downward trend in inflation, but said they were "keeping the door open for a possible further rate hike".

Oil prices were firmly lower with Brent crude down a further 1.1% on Thursday at $81.04 a barrel by 1230 CET, continuing its descent after exceeding $95 briefly in late-September. Oil tumbled on Wednesday after OPEC+ delayed a meeting by a week to 30 November with rumours that member countries were not aligned on current production. According to Bloomberg, Saudi Arabia has expressed "dissatisfaction" with output levels of other members.

In other news, Sweden's central bank kept interest rates unchanged on Thursday. The Riksbank announced that it was maintaining its key policy rate at 4.0%, surprising analysts who had expected a rise to 4.25%. However, it stressed that policymakers were prepared to raise rates further "if the prospects for inflation deteriorate".

PMIs beat forecasts

Purchasing managers' indices (PMIs) were in focus on Thursday, and most of them in better than forecasts. The S&P Global/HCOB composite PMI for the eurozone rose to a two-month high of 47.1, up from 46.5 in October. This was better than the consensus estimate of 46.9 but still firmly below the 50-point level which separates growth from contraction, showing the business activity in the region was still falling.

While the services and manufacturing PMIs surprised to the upside, both remained well below 50, with manufacturing output in particular contracting for the eighth month straight. Meanwhile, data from the region's two largest economies, France and Germany, painted a mixed picture: German numbers beat forecasts across the board while French figures disappointed.

Commenting on the data, HCOB's chief economist Cyrus de la Rubia said the eurozone economy was "stuck in the mud". De la Rubia said: "Over the last four to five months, the manufacturing and services sectors have both been experiencing a relatively constant contraction pace. Considering the flash PMI numbers for November in our nowcast model indicates the potential for a second consecutive quarter of shrinking GDP. This would align with the commonly accepted criterion for a technical recession."

Over in the UK, the S&P Global/CIPS composite PMI for November jumped to 50.1 from 48.7 last month, with the services sector returning to growth alongside a softer downturn in manufacturing. Analysts were expecting no change in the composite reading.

Trade Nation's Morrison said the data "adds to concerns that the eurozone and the UK could be about to post some negative growth numbers and so put pressure on both the Bank of England and European Central Bank to keep rates on hold, or even cut earlier than they would wish, even as inflation remains well above the 2% target for both."

Oil stocks provide a lift

Oil stocks were rallying on Thursday, rebounding after falling the previous two sessions on the back of declining oil prices. BP, Shell, Repsol and TotalEnergies were all putting in decent gains.

In contrast, airline and travel stocks - which have surged in recent days - were pulling back with TUI, easyJet, Carnival, Deutsche Lufthansa and Air France-KLM in the red.

London-listed Virgin Money UK shares were down nearly 7% after it reported a 42% drop in annual pre-tax profits to £345m, some 20% lower than analysts were estimating, due to worse-than-forecast costs and impairments as well as a £45m unexpected intangible asset write-down on its new mortgage platform.

Also in London, product inspection, testing and certification company Intertek gained as it said it's on track to deliver on targets for 2023 after a solid third quarter, though currency movements were limiting growth more than expected.

Swedish banks were performing well after the Riksbank decision, with Swedbank, Svenska Handelsbanken and Skandinaviska Enskilda Banken all higher.


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