European markets rise as COVID wave knocks German consumer confidence

·3-min read
COLOGNE, GERMANY - NOVEMBER 23: A child is looking at Christmas wooden decorations at the annual Christmas market at Alter Markt during the fourth wave of the novel coronavirus pandemic  on November 23, 2021 in Cologne, Germany. While Christmas markets opened in North Rhine-Westphalia today, several German states with particularly high infection rates, including Bavaria and Saxony, have banned their Christmas markets and introduced other restrictions in an effort to reign in infections. Infection rates have skyrocketed across Germany in recent weeks, leading politicians to appeal yet again to those not vaccinated yet to do so.  (Photo by Andreas Rentz/Getty Images)
Official figures released on Thursday show Germany has become the latest country to surpass 100,000 deaths from coronavirus since the pandemic began. Photo: Andreas Rentz/Getty Images

European stock markets advanced on Thursday despite a surge in coronavirus infections, and soaring inflation, hitting households in Germany.

In London, the FTSE 100 (^FTSE) closed 0.3% higher on the day, while the CAC (^FCHI) gained 0.4% in Paris, and the Frankfurt DAX (^GDAXI) was 0.2% higher.

The gains came despite the GfK barometer showing consumer confidence in Germany tumbled to -1.6 for December, down 2.6 points from the previous month, amid a recent surge in COVID and fears of another lockdown.

Meanwhile, estimates for economic growth in Europe’s largest economy in the third quarter were revised down from 1.8% to 1.7%.

GfK consumer expert Rolf Buerkl said: “Consumer sentiment is currently being squeezed from two sides. On the one hand, the number of cases in the fourth wave of the coronavirus pandemic is exploding, which threatens to overwhelm the health system and could lead to further restrictions.

Watch: Germany mulls a lockdown as COVID cases rise in Europe

“On the other hand, the purchasing power of consumers is dwindling due to a high inflation rate of 4%. The outlook for the upcoming Christmas season is now somewhat bleak.”

Official figures released on Thursday show Germany has become the latest country to surpass 100,000 deaths from coronavirus since the pandemic began.

Elsewhere, the pound slumped to an 11-month low against the dollar (GBPUSD=X), its lowest level of the year, as the prospect of the US Federal Reserve tightening policy faster than expected boosted the greenback.

The pound eased by 0.1% against the dollar to $1.3304, the lowest since last December.

The euro also weakened on the back of the news, trading at its lowest level against the dollar (EURUSD=X) since July last year. It was also near a 21-month low against the pound (EURGBP=X).

Read more: Pound and euro suffer against dollar as US Fed looks to faster tapering

In the US markets are closed for the Thanksgiving holiday. The S&P 500 and Nasdaq ended Wednesday with healthy gains but the Dow edged slightly lower.

It came as data revealed that the US economy grew at an annualised rate of 2.1% in the third quarter of the year, slightly higher than the 2% pace estimated a month ago, with consumer spending up 1.7%.

This comes after 6.7% growth in the previous quarter, due to a slowdown in consumer spending, the US Commerce Department’s Bureau of Economic Analysis revealed.

Read more: UK manufacturing orders strong despite supply chain issues

Meanwhile, initial jobless claims fell by 71,000 to 199,000 in the week to 20 November, the US Labour Department said separately on Wednesday. This was better than the 260,000 expected by economists and the lowest level since November, 1969 when it was 197,000.

Equity markets mostly rose in Asia on Thursday as a batch of strong economic data spurred expectations that the Federal Reserve will withdraw its vast financial support and lift interest rates earlier than thought.

In Japan, the Nikkei (^N225) climbed 0.7% while the Hang Seng (^HSI) rose 0.2% in Hong Kong and the Shanghai Composite (000001.SS) dipped 0.2%.

Tensions between the US and China are continuing to escalate after Beijing said it would take all measures necessary to protect its companies, threatening to retaliate over the latest wave of US sanctions.

The US government added 12 firms to its trade blacklist on Wednesday over national security and foreign policy concerns.

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