European stocks closed the week without enthusiasm and a single direction

Western Europe's leading stock indicators were trading mixed on Friday. Investors nervously anticipated important macro data for the Euro-region countries and the United States. At the same time the leaders of growth today were the securities of raw materials sector.

Thus, the pan-European Stoxx 600 rose by 0.13% to 439.90 points.

By the way, the Stoxx 600 index fell by 13% in 2022. This decline was the sharpest since 2018, and the main reasons are the negative consequences of the situation in Ukraine, the global energy crisis, as well as the permanent acceleration of inflation and decisive actions of global central banks to combat it.

On Friday, the French CAC 40 gained 0.04%, the German DAX gained 0.25%, and the British FTSE 100 gained 0.3%, jumping to a nine-month high.

Meanwhile, the CAC 40 was down 8.7% last year, the DAX was down 11.9% and the FTSE 100 was up 1.4%.

Leaders of growth and decline

The share price of British-Dutch oil and gas company Shell Plc rose by 1.1%. The company said that earnings from its liquefied natural gas trading operations have been significantly higher in the fourth quarter of 2022.

Norwegian hydrogen producer NEL ASA soared 6.3%.

The share price of Swedish appliance maker Electrolux AB jumped 5.2%.

Swedish clothing chain Hennes & Mauritz AB gained 5%.

The share price of Swedish entertainment company Viaplay Group AB plummeted by 5.3%.

European automobile concern Stellantis NV sank by 1.2%.

Market sentiment

On Friday, European traders were waiting for economic data for the countries of the region. The Statistical Office of the European Union (Eurostat) was set to publish a preliminary assessment of annual inflation in 19 countries of the euro area by the end of December. Experts expect the index to slow down to 9.7% from November's 10.1%.

Traders were also set to pay attention to retail sales in the euro-region states in November. Analysts expect a 0.5% increase after a 1.8% decline in October.

On Friday, global market participants assessed the data on unemployment in the United States, presented in a key report on the US labor market. Experts expect the US unemployment rate in December 2022 to remain at the November and October levels of 3.7%, with nonfarm payrolls rising by 200,000 after a 263,000 increase in November.

Fresh data from the U.S. Labor Department will help forecast the Federal Reserve's future stance on monetary policy.

European investors would also assess the latest data from the region's largest countries. According to information from the German Federal Statistical Office (Destatis), Germany's retail sales rose 1.1% in November compared to October. However, projections were growth by 1%.

According to Destatis, industrial orders fell by 5.3% in November, the decline was steeper than expected as it followed a downwardly revised rise of 0.6% in October. The index decreased as much as possible since autumn 2021. A poll of analysts had pointed to a 0.5% fall.

Meanwhile, the National Statistical Office of France Insee reported that consumer spending in the country in November 2022 increased by 0.5% compared with October. At the same time, experts had expected an increase by 1.1%.

Trading results the day before

On Thursday, the leading stock indices of Western Europe closed mostly in the red zone. European investors were under pressure due to the release of the minutes of the Federal Reserve's December meeting.

Thus, the Stoxx 600 dropped 0.2% to 439.33 points.

French CAC 40 lost 0.22%, German DAX gained 0.38% and British FTSE 100 gained 0.64%.

The share price of Swedish carmaker Volvo Car lost 3.7%. The company's car sales fell 12% in 2022 on year amid supply-chain challenges and production restraints in China.

UK retailer of clothing, footwear and household goods Next Plc shares soared by 6.9%. During the holiday period, which ended on December 30, the company recorded better than expected sales growth. Consequently, Next raised its earnings guidance for the fiscal year ending in January. In addition, the company upgraded its pre-tax profit guidance for the full year to 860 million pounds.

The share price of Irish airline Ryanair Holdings Plc rose 6.1%. The day before, Europe's largest budget carrier improved its forecast for the current fiscal year ending in March amid high demand for the company's services during the holidays.

Finnish airline Finnair Oyj increased by 3.5%. The company's management reported an 11% increase in passenger numbers for December 2022.

On Thursday, European traders assessed the release of the Fed's December minutes. According to the document, the US central bank plans to continue tightening monetary policy until inflation returns to the 2% target level.

Thus, the hopes for possible softening of the monetary policy by the Fed in 2023 are not yet justified.

Recall that during the December meeting, the Fed raised the interest rate by 50 basis points - up to 4.25-4.5% per annum. At the same time, US interest rates set by the Fed rose to their highest since 2007. In a commentary on December's meeting, Fed Chairman Jerome Powell said the US central bank would stay on course to tighten monetary policy until inflation returned to the 2% target.

According to the latest data of the largest North American financial derivatives market CME Group, more than 70% of experts expect the key interest rate in the US to increase by 0.25 percentage point in February, up to 4.5-4.75% per year.

On Thursday, European investors also analyzed the latest data on the largest countries of the region. Thus, according to preliminary information from Insee, consumer prices in the country rose 6.7% y/y in December. The inflation rate fell compared with the November rate of 7.1%. In this case, experts on average predicted an increase in December by 7.2%.

Meanwhile, the eurozone's construction Purchasing Managers' Index (PMI) fell to 42.6 points in December 2022 from 43.6 points in November 2022. The PMI has remained below the 50-point mark for eight months in a row. Recall that a figure below 50 points indicates a decline in activity in the sector.

According to the latest report of Eurostat, eurozone producer price inflation fell to its lowest level since December 2021, with prices registering an annual increase of 27.1% from 30.5% in October. At the same time, producer prices fell by 0.9% in November compared to the month prior.

European investors continue to discuss news on easing of Covid controls in China, which have been among the strictest in the world over the past few years. China will lift mandatory quarantine measures for inbound travelers from January 8. A negative test for coronavirus will be required to enter the country.

In addition, Beijing authorities reduced the level of surveillance of the coronavirus, rejecting the legal basis for the introduction of enhanced infection control measures.

In response to this move by Chinese authorities, some states have tightened requirements for visitors from the PRC. The United States, for example, is introducing mandatory testing for people arriving by air from China as of Jan. 5.

Traders around the world have recently been seriously concerned about China's "zero-Covid" policy, as new and existing restrictive measures in China have had a negative impact on the country's economic activity as well as on stock trading.

At the end of November, mass protests erupted in Shanghai against China's stringent Covid restrictions. The police dispersed protesters with gas canisters.

After that, markets began to hope that mass protests in Chinese cities would force local authorities to loosen regional restrictions. Fresh news from China sent a welcome positive signal that the world's second-largest economy could return to robust growth.