European markets experienced a notable surge Thursday, fueled by surprisingly muted US inflation data and a widespread expectation of continued monetary policy restraint from the European Central Bank (ECB). The German DAX index closed at 24,200 points, a 1.0% increase from the previous day’s close, marking a significant turnaround after a period of decline.
While traders largely shrugged off the ECB’s expected decision to maintain current interest rates – a move widely anticipated – the simultaneous release of US inflation figures generated considerable optimism. The Consumer Price Index (CPI) registered at 2.7% in November, a lower-than-expected outcome, with the core rate falling to 2.6%. This sparked a positive investor sentiment, immediately impacting Wall Street and subsequently bolstering European markets.
However, analysts caution against interpreting the data as a definitive trend reversal. Christine Romar, Head of Europe at CMC Markets, emphasized the potential for methodological flaws in the US figures, attributed to disruptions caused by the recent government shutdown. “The ongoing data collection was incomplete in some areas, raising concerns about the reliability of the reported metrics” she noted. “A clearer understanding of the underlying inflationary trajectory likely won’t emerge until the December and January reports are available. Nevertheless, this minor pre-holiday surprise provided a much-needed boost to market morale.
Siemens Energy and Deutsche Bank led the gains in Frankfurt, while Mercedes-Benz, BMW, Merck, BASF and Beiersdorf lagged at the bottom, reflecting a mixed performance across the index.
Beyond equities, energy prices saw upward movement, further complicating the economic landscape. Natural gas prices rose to €27 per megawatt-hour (MWh) for January delivery, a 1% increase, potentially translating to consumer electricity prices exceeding 7 to 9 cents per kilowatt-hour (kWh) if this level persists. Simultaneously, Brent crude oil climbed to $60.09 per barrel, a 0.7% increase from the previous trading day’s close.
The euro strengthened slightly against the dollar, reaching $1.1742, indicating a weaker dollar at 0.8516 euros. This currency fluctuation underscores the ongoing interplay between macroeconomic indicators and investor confidence, raising questions about further volatility and highlighting the delicate balance policymakers are navigating as they attempt to stabilize the global economy.
