European markets marginally lower as investors digest central bank announcements

Euro zone bond yields moved higher after the European Central Bank clearly signaled to investors that interest rates will climb further and no cuts are on the horizon.

The yield on German 10-year bonds, considered a benchmark for euro zone borrowing, was up 12 basis points to 2.2% at 11:30 a.m. Berlin time.

Its 2-year bond yield was up 11 basis points to 2.5%, the highest level since 2008, while Germany’s yield curve inversion hit a fresh 30-year high.

An inverted yield curve has previously been a predicator of a recession and indicates worsening near-term economic expectations.

The ECB on Thursday slowed the pace of rate rises to 50 basis points, but also announced the start of quantitative tightening in March 2023 and said hikes would continue “significantly at a steady pace.”

It said the inflation forecasts it uses had been revised upward and do not indicate a return to its 2% target until 2025; but also that it expected a recession in the bloc to be “relatively short-lived and shallow.”

— Jenni Reid

European indexes have remained resilient despite external shocks, CEO of Euronext Stephane Boujnah told CNBC’s Joumanna Bercetche at the Conference of Paris.

Boujnah discussed recent market volatility, the strength of commodities and primary listings in the U.K.

Business activity in the euro zone is continuing to slip, according to the S&P Global’s flash composite Purchasing Managers’ Index (PMI), but the slowdown is easing.

The PMI rose to a four-month high of 48.8, up from 47.8 in November.

The new data suggests that while a recession is likely, it could be shallower than previously anticipated.

December was the sixth month where the figure fell short of the 50 mark that divides growth and contraction, which is the longest downturn streak since June 2013.

— Hannah Ward-Glenton

The downturn faced by U.K. businesses has eased slightly in the last month, according to UK S&P Global Composite Purchasing Managers’ Index (PMI) data.

The index unexpectedly rose to 49.0 from 48.2 in November, well above the Reuters economists’ estimate of 48.0.

The services sector headed up increases, while British manufacturing continued to decline.

— Hannah Ward-Glenton

The Norwegian oil firm Aker BP will invest more than 200 billion Norwegian krone ($20.5 billion) to develop oil and gas fields around Norway in the upcoming years, the company said.

Aker BP was one of several oil firms working off Norway to submit project plans for approval before temporary tax benefits expire at the end of the year.

Aker BP is partly owned by BP and is the second-largest petroleum producer off Norway after Equinor.

— Hannah Ward-Glenton

Shares of Games Workshop shot up 12% after the company announced an agreement with Amazon to develop one of its games into film and TV productions.

The British game manufacturer is best known as the maker of miniature wargame Warhammer 40,000, which Amazon now has rights to use for its content services.

— Hannah Ward-Glenton

European markets are expected to open higher Friday.

Britain’s FTSE 100 is seen around 33 points higher at 7,456, Germany’s DAX is set to jump by around 33 points to 14,019 and France’s CAC 40 is expected to add around 18 points to 6,533. Italy’s MIB index is set to add 32 points to 23,787.

— Hannah Ward-Glenton

Big Tech stocks have been hit hard by this year’s sell-off, but Morgan Stanley thinks the current share price weakness of one stock presents an “opportunity to own one of the highest quality tech platforms.”

Pro subscribers can read more here.

— Zavier Ong

UBS upgraded its outlook for China’s 2023 gross domestic product to 4.9%, versus 4.5% previously, according to its chief China economist Wang Tao, citing an earlier and faster reopening in the nation.

Wang said the firm expects a weaker fourth-quarter GDP for 2022, downgrading its full-year forecast to 2.7% from 3.1%, pointing out November’s weakened growth with a recent surge in Covid cases.

The firm added that the Central Economic Work Conference will likely prioritize stabilizing growth as well as supportive macro policies for the upcoming year.

“We expect fiscal policy to stay proactive with small increase of headline deficit and new special LG [local government] bonds, monetary and credit policy to keep supportive with continued ample liquidity but unlikely any additional policy rate cut,” Wang said in the note.

— Jihye Lee

Stock futures opened lower as investors came off a second day of selling off.

Futures tied to the Dow lost 40 points or 0.1%.

S&P 500 and Nasdaq 100 futures both shed 0.1%.

— Alex Harring