German Industrial orders fall Short in November, Raising Concerns
In a surprising turn of events, Germany’s industrial orders unexpectedly dipped in November, casting a shadow over hopes of a robust economic recovery. The decline, largely attributed to a drop in bulk orders, raised concerns about the health of Europe’s largest economy.
Mixed Signals from the Data
Despite the overall decrease, there were glimmers of hope in the data. economist Greg Fuzesi from jpmorgan noted that excluding bulk orders,which can be volatile,orders actually inched up slightly.This suggests a potential for stabilization in the industrial sector.
“Today’s German industry data hint at some stabilisation,although the ongoing weakness in the business surveys still warrants caution about the near-term outlook,” Fuzesi said. He highlighted the positive trend in domestic non-bulk orders, which had been lagging behind in recent months.
Fuzesi cautioned, however, that it’s premature to declare an end to the downward trend in domestic orders.
Consumer sentiment Takes a Hit
Adding to the economic anxieties in the region, the European Commission reported a decline in the European economic sentiment indicator for December. Both the EU and the euro area experienced a drop in this confidence score, which is derived from surveys of businesses and consumers.
Consumer confidence plunged for the second consecutive month, signaling a potential slowdown in spending, a key driver of economic growth. This follows previous reports from institutions like the European Central Bank (ECB) highlighting concerns about persistent inflation eroding consumer purchasing power and leading to a buildup of savings.
Saving for a Rainy Day
The ECB suggested that euro zone households, facing the squeeze of high inflation, may continue to prioritize rebuilding thier financial reserves, leading to continued subdued consumption. This cautious approach could dampen economic growth prospects in the months ahead.
As Europe navigates these economic uncertainties, policymakers and analysts will be closely watching for signs of a turnaround in consumer sentiment and a return to more robust economic activity.
german Industrial Orders Dip in November, Raising Concerns for Europe’s Largest Economy
New data released on wednesday painted a worrisome picture for the German economy, revealing an unexpected decline in industrial orders during November. This downturn signals further gloom for Europe’s largest economy, which has been grappling with various challenges.
The primary culprit behind the decline in orders, according to Destatis,the German Federal Statistical Office,was the absence of large-scale orders for transportation equipment,which had bolstered numbers in October. These large orders, encompassing sectors like aircraft, ships, trains, and military vehicles, were not repeated in November, leading to the dip.
“This high volume of large-scale orders was not repeated in November,” Destatis noted.
Shell Lowers LNG Production Outlook, Cites Challenging market Conditions
Adding to the economic concerns, British energy giant Shell adjusted its liquefied natural gas (LNG) production forecast for the fourth quarter of 2024. The company also warned that trading results for its chemicals and oil products division were anticipated to be “significantly lower” compared to the third quarter.
Shell attributed the lower expectations in its chemicals and oil products division to seasonal factors.The company also projected non-cash post-tax impairments of $1.5 billion to $3 billion in the fourth quarter and a $1.3 billion charge related to the timing of payments for emissions certificates, specifically in Germany and the U.S.
Despite these headwinds, shell’s London-listed shares have shown resilience, climbing over 5% year-to-date.
Andrew Critchlow, head of EMEA news at S&P Global Platts, commented on Shell’s update, stating, “It was a pretty tepid year for oil markets last year and that has a knock-on affect on all the oil majors.”
ETFs Outperforming the S&P 500: A Sign of Investor Confidence?
in a possibly positive progress, a CNBC Pro screen identified four ETFs in Europe and North America that have consistently outperformed the S&P 500 over the past five years. This finding suggests that certain investment strategies and sectors might be navigating the current market climate more effectively.
CNBC Pro subscribers can access the full details of these high-performing ETFs here.
Stock Market Outlook: Bull Market Expected to Continue Despite Valuation Concerns
Despite concerns about high valuations in the US stock market, investment firm UBS remains optimistic about the prospects for equities in 2025. UBS analysts believe that strong earnings growth will continue to drive positive returns, potentially leading to another year of “concentrated returns,” building on the momentum seen in 2024.
David Lefkowitz, CIO head of US equities for UBS, stated in a Monday note to clients that “U.S. equity valuations are higher than average, but historically valuations have had very little correlation with returns over the next 12 months. Instead, profit growth matters more. We think the bull market remains intact driven by solid economic and corporate profit growth.”
UBS projects “healthy” S&P 500 earnings per share growth of 9% this year. While the firm anticipates volatility in the market, it maintains a bullish stance on stocks overall.
Goldman Sachs Favors European Cable Manufacturer
Meanwhile, Goldman Sachs is also optimistic about certain European stocks. The investment bank recently added one of Italy’s cable manufacturing giants to its “Conviction List – Directors’ Cut” for Europe,highlighting the company’s potential for growth in the expanding data center sector.
CNBC Pro subscribers can access more data about Goldman Sachs’ investment recommendation.
European Markets Expected to Open Lower
Turning to European markets, analysts anticipate a broadly lower opening on Wednesday. The U.K.’s FTSE 100 index is projected to open 4 points lower at 8,242, while Germany’s DAX is also expected to decline.
european Markets Open Lower as Traders Brace for key Economic Data
European markets kicked off the trading day on a downbeat note, with major indices experiencing declines. Germany’s DAX slipped 40 points to reach 20,308. Similarly, France’s CAC dipped 22 points,settling at 7,477.Italy’s FTSE MIB followed suit, dropping 83 points to close at 34,922, according to data provided by IG.
economic Data and Earnings in focus
Traders are keenly anticipating the release of European consumer confidence and economic sentiment data, which could offer insights into the health of the region’s economy. Adding to the day’s watchlist is the fourth-quarter update from energy giant Shell, expected to shed light on the company’s performance amidst volatile energy markets.
— Holly Ellyatt
