Inflation Rates Underwhelm Expectations
Germany’s inflation rate rose to 2.2% in November, falling short of analysts’ predictions. The figures revealed a notable 0.2% drop in monthly inflation, signifying a trend toward disinflation. Core inflation, which excludes more volatile items like food and energy, increased to 3.0%, marking its highest level since May. Amid these shifts, Bund yields fell to 2.14%, and the DAX index saw a modest rise of 0.5%, while the euro weakened slightly.
Monthly Inflation Shows Significant Decline
The Federal Statistical Office reported that consumer prices increased by 2.2% year-on-year in November, a rise from October’s 2.0% but below the anticipated 2.3%. This monthly report also highlighted the sharpest decline in inflation in a year, as the consumer price index (CPI) dropped by 0.2%. Energy prices continued to decrease, falling 3.7% year-on-year, although the pace of decline slowed compared to a 5.5% drop in October.
Services Inflation Stays Strong
While energy prices exerted downward pressure, the inflation of services remained steady at 4% year-on-year. Core inflation, which excludes food and energy, is projected to rise to 3.0% in November, up from 2.9% in October. The Harmonised Index of Consumer Prices (HICP)—a crucial measure for eurozone comparisons—stayed at 2.4% year-on-year, falling below the expected increase to 2.6%. Additionally, harmonised monthly inflation reported an unexpected decline of 0.7%, the most significant drop in a year.
Market Responses Remain Muted
The release of Germany’s inflation data didn’t significantly shake financial markets amid a quiet trading session caused by the U.S. Thanksgiving holiday. Bund yields dipped slightly by 2 basis points to 2.14%, marking a continued decline. Investors flocked to the safety of German government bonds due to growing concerns about economic slowdowns and potential impacts from U.S. tariffs. The DAX index rebounded with a 0.5% gain, recovering after two days of losses.
Highlights in the Stock Market
Within the DAX, major gains were seen in stocks like Airbus, which surged by 3.6%, Daimler Truck Holding AG up by 2.6%, and RWE which rose by 2.1%. Conversely, Fresenius Medical Care and Symrise posted losses of 1.9% and 1.1%, respectively. Similarly, the Euro Stoxx 50 index mirrored these gains, buoyed by strong performances from ASML Holding N.V. and various European banks, including Banco Sabadell, ING Groep, and Deutsche Bank.
SOURCE: Ref Image from Reuters
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