DAX Index, FTSE 100, STOXX 600: Mixed Trade with Europe Cautious, UK Resilient

Inflation and Interest Rate Trends

The UK’s inflation has decreased from a high of 11% in 2022 to 4% by December 2023, thanks to the BOE’s progressive interest rate hikes. Despite this reduction, inflation remains above the BOE’s 2% target.

Global and Domestic Economic Outlook

Global GDP growth remains subdued, with some recovery in the U.S. The UK anticipates gradual GDP growth and a slight rise in unemployment. Inflation projections are set around 2.75% by year-end, primarily driven by domestic factors.

Euro Zone Inflation Data

Euro zone’s annual headline inflation eased to 2.8%, matching economists’ predictions. Core inflation figures declined less than expected, indicating continued economic pressure.

Corporate Highlights

• BNP Paribas shares dropped 8% following a sales miss and profit target delay.
• Volvo Cars’ shares soared 23% after announcing the end of funding for Polestar Automotive, signaling a new growth phase.
• Shell reported a full-year profit beat, announcing a $3.5 billion share buyback.
• Adidas expects a significant increase in operating profit for 2024, aided by selling off Yeezy stock.
• Deutsche Bank’s fourth-quarter net profit exceeded expectations, with plans to increase shareholder returns.

Market Forecast

In the short-term, the FTSE-100 is expected to exhibit resilience, buoyed by a favorable corporate earnings landscape and gradual economic growth in the UK. The index might experience volatility but maintain an upward trend, reflecting investor confidence in the UK market’s stability.

The DAX Index, on the other hand, faces a more cautious outlook. Economic uncertainties in the Eurozone, combined with mixed corporate performances, could lead to restrained gains or slight fluctuations. Overall, investors in the DAX may adopt a more defensive stance, focusing on sectors likely to withstand macroeconomic pressures.