Editor’s Note
The Bundesbank’s latest forecast suggests Germany’s economy will continue growing in early 2024, albeit slowly, with stronger momentum expected from spring driven by public investment.
According to the Bundesbank’s forecast, the German economy is expected to remain on a growth trajectory at the beginning of the year. “In Q1, the economy is likely to continue expanding, albeit with weak momentum,” states the monthly report. Both industry and exports are expected to increase, following a recent significant improvement in order intake. From spring onwards, the Bundesbank anticipates more momentum – “driven primarily by fiscal impulses,” i.e., government investments in infrastructure and defense.
The order backlog of German industry grew for the 5th consecutive month in December and is now as large as it was over three years ago. The volume of open orders increased by 1.2% compared to the previous month, as reported by the Federal Statistical Office. Compared to the same month last year, the increase was even 7.0%. The coverage ratio of the order backlog rose to 8.2 months in December – the highest value since the statistics began in 2015. This value indicates how many months companies would theoretically have to produce at constant revenue without new business to work off existing orders.
This morning, a whole series of Purchasing Managers’ Index (PMI) data from the Eurozone and also from the United Kingdom will be released. We partly expect a minimal improvement, but the trees are not (yet) growing to the sky. Furthermore, Q4 figures for the USA will be presented for the first time, with we expect an annualized growth rate of 2.6%. Although our forecast is significantly lower than the previous two quarters, it is still expected to be relatively strong. Additionally, the PCE price deflator, one of the Fed’s favorite statistical measures, will be published. We expect a slightly increased, but not critical, inflation rate here.
After its strong previous day with a breakout above the 25,000-point mark, the DAX has shifted into reverse gear. Notable were high share price losses for Airbus. The mood was somewhat dampened on Thursday by the US Federal Reserve, which in the minutes of its latest meeting emphasized the risks that could arise from excessively high inflation. Recently, hopes for a Fed rate cut had already been pushed back. DAX -0.93%; MDAX -0.83%; TecDAX -0.63%.
Wall Street closed with losses. The market was primarily weighed down by share price declines in private equity firms and technology stocks, while strong results from the industrial sector limited the losses. Dow Jones -0.54%; S&P 500 -0.28%; Nasdaq Comp. -0.31%.
The Hamburg port operator HHLA increased its revenue and earnings in the past financial year. According to preliminary figures, group revenue rose by 9.9% to EUR 1.756 billion and group operating result (EBIT) increased by 19.5% to EUR 161 million.
The world’s largest filling plant manufacturer Krones is defying the weak USD. The family-owned company reported that revenue increased by 7.0% to EUR 5.66 billion last year. The operating result (EBITDA) rose by 12% to EUR 602.3 million, with the operating return on sales at 10.6% (2024: 10.1%) in the upper half of the targeted range of 10.2% to 10.8%.
After its recent sharp decline, the EUR has stabilized. Previously, speculation about an early departure of ECB President Lagarde had caused the euro to slide. From analysts’ perspective, the common currency remains vulnerable in the coming weeks should weaker-than-expected fundamental and price data fuel rate cut fantasies.
Following the recent significant oil price increase, investors remained cautious on Thursday. The biggest concern for oil investors is that an escalation of tensions between the USA and Iran could affect shipping traffic in the Strait of Hormuz. Approximately 20% of global oil consumption is handled via this waterway.
The ongoing tensions between the USA and Iran are prompting investors to buy gold and silver. Gold appreciated by 0.9% to USD 5,021 per troy ounce, silver traded up to 2.6% higher at USD 79.15 per troy ounce. Fear of a conflict in the Middle East is likely to increase demand for safe-haven assets.