DAX, CAC, FTSE 100 – Mostly Higher on Lower ECB Interest Rate Expectations

Key Takeways

• European real estate stocks drive slight DAX rise.
• European bond yields fall as ECB policy tightening bets shift.
• Volkswagen announces €180bn investment plan for electrification and digitalization.

Overview

European real estate stocks drove a 0.1% rise in the pan-European STOXX 600 index (.STOXX) on Tuesday, following a three-day sell-off triggered by the collapse of Silicon Valley Bank (SVB). The slump had sent shivers through the banking sector worldwide. SVB’s collapse is widely seen as being due to high US interest rates.

At 11:40 GMT, Germany’s DAX is trading at 15081.44, up 121.97 or +0.82%. The UK’s FTSE 100 is at 7549.72, up 1.09 or +0.01% and France’s CAC 40 is trading 7054.15, up 42.65 or +0.61%.

Some Sectors to Benefit from Lower Interest Rates

Real estate stocks climbed 1.6%, while utilities jumped 1.1%, with investors buying into these sectors that are expected to benefit from lower interest rates.

European bond yields fell further, with investors betting on a reduced policy tightening by the European Central Bank (ECB).

Traders now expect a 25 basis-points hike as the most probable outcome of the ECB’s policy meeting on Thursday. This is half the size of the increase estimated with near certainty last week, mirroring the shift in bets on a Federal Reserve rate hike next week.

US Investors Bracing for Key Consumer Inflation Data

The next move by the Fed is expected to be guided by US inflation data. The data is due at 12:30 GMT and is anticipated to show a slight cooling of consumer prices in February.

The U.S. consumer price index for February is expected to come in at 0.4% on a monthly basis. Or at a 6% annual pace, according to Dow Jones estimates. That’s just slightly lower than January’s inflation data of 0.5% and 6% respectively.

Volkswagen Announces Five-Year $193 Billion Investment Plan as Electrification Gathers Pace

Volkswagen has announced a five-year investment plan worth €180bn ($192.6bn) between 2023 and 2027, with over two-thirds of the investment aimed at “electrification and digitalization”.

The German automaker had reported a full-year operating profit of €22.5bn in 2022, with battery and EV deliveries rising by 26%.

Arno Antlitz, CFO and COO of Volkswagen Group, said that the company’s strong financial position would allow them to “continue investing in electrification and digitalization” even in a “challenging economic environment”.

The move towards electrification comes as many other automakers around the world are pledging to increase investments in electric vehicles to meet ambitious climate targets.