German borrowing costs soar
The yield on Germany’s 10-year government bonds — known as bunds — surged on Wednesday, adding 21 basis points by 11:14 a.m. London time.
Shorter-term government borrowing costs also rose, with yields on 2- and 5-year bunds climbing 14 and 19 basis points higher, respectively.
It came after German lawmakers from parties widely expected to form a new coalition government agreed to work to reform the country’s debt brake rule in a bid to allow an increase in national defense spending.
— Chloe Taylor
LSEG CEO says listing challenges a global problem
London’s listing problem isn’t limited to the capital, with weakness in the U.S. and Asia too, according to the head of the London Stock Exchange Group.
According to EY, there were just 18 initial public offerings on the London Stock Exchange last year – eight of which came in a fourth quarter flurry.
But LSEG CEO David Schwimmer said it’s not a unique problem.
“We have seen on a global basis, a pretty subdued environment for IPOs, and that’s been in New York, that’s been in Hong Kong,” he told CNBC. “That’s got a lot of attention.”
Read the full story here.
— Zahra Tayeb
‘Game changing’: Analysts react to German debt brake proposals
Tuesday’s agreement between leading German political parties to prepare to loosen debt restrictions has been described by economists and analysts as a historic move — so long as it can be secured.
The move would allow billions in additional defense and infrastructure spending.
Jim Reid, Deutsche Bank’s head of global macro and thematic research, said in a Wednesday note the plan was for “one of the largest fiscal regime shifts in post-war history, perhaps with reunification 35 years ago being the only rival.”
“Everything you thought you knew about Germany’s economic prospects 3 months ago, or even 3 weeks ago, should be ripped up and you should start your analysis from fresh. This is game changing if it goes through.”
The deal’s open-ended borrowing room for defense and proposal for a 500 billion euro ($535.4 billion) special purpose vehicle is well beyond what had been expected, Reid continued — but noted that the Greens have not yet confirmed they will support the move, which is needed to gain a constitutional majority.
(From L) Bavaria’s State Premier and Leader of the conservative Christian Social Union (CSU) Markus Soeder, Leader of Germany’s Christian Democratic Union (CDU) Friedrich Merz, Germany’s Social Democratic Party (SPD) co-leader and parliamentary group leader Lars Klingbeil and Germany’s Social Democratic Party (SPD) co-leader Saskia Esken deliver a press statement at the Jakob Kaiser Haus parliamentary building in Berlin, on March 4, 2025.
Ralf Hirschberger | Afp | Getty Images
“We do expect this bill to have a huge positive economic impact,” Louise Dudley, portfolio manager for global equities at Federated Hermes, told CNBC’s “Squawk Box Europe” on Wednesday.
“I think, you know, the German people wanted that, they’d come out 2024 quite negative, and that’s certainly going to have wide reaching impacts across the economy.”
ING’s global head of macro, Carsten Brzeski, said Tuesday that the joint announcement had also shown a “strong intention to establish a robust government coalition” that would not be undone by fiscal disputes as in the past.
“At face value, these two policy announcements would clearly benefit the German economy. A €500 billion infrastructure fund would address urgently needed investments, providing both short-term economic support and increasing long-term growth potential,” Brzeski said in a note.
“However, we wouldn’t rule out that the official coalition talks will still bring some expenditure cuts, which would lower the positive impact of the announced fiscal stimulus.”
Morgan Stanley analysts meanwhile said they expected the overall package to reach more than a trillion euros, and that they saw upside risks to their German economic growth forecast of 20 basis points in 2025 and 70 basis points in 2026.
— Jenni Reid
European banking sector heats up, with German lenders leading gains
Shares of Germany’s largest lenders perked up in early Wednesday trading, amid news of a potential debt policy overhaul in Europe’s biggest economy and positive momentum across the broader European banking sector.
The European banking index was up 3.21% at 8:42 a.m. London time, with Deutsche Bank up 9.13% and Commerzbank 6.98% higher. Outside of the European Union, stock of British bank Barclays added 6.77%.
Germany’s Friedrich Merz, widely expected to step in as the country’s next chancellor following February elections, on Tuesday announced plans for potential reform to loosen the country’s so-called debt brake fiscal policy on borrowing to allow higher defense spending — in a move that rippled into gains for Germany’s DAX and German bond yields early on Wednesday.
Deutsche Bank share price.
Europe stocks open higher, led by Germany
European stock markets opened higher Wednesday, with Germany’s DAX index jumping 2.8% after the parties expected to form the next government agreed a deal that could lead to increased spending on infrastructure and defense.
France’s CAC 40 and the U.K.’s FTSE 100 were 1.8% and 0.5% higher, respectively, with the pan-European Stoxx 600 index up by 1.2%.
Stoxx 600 index.
Chip giant ASML says its customers were ‘cautious’ in 2024, flags coming AI boost
Dutch semiconductor equipment maker ASML said in its annual report Wednesday that macroeconomic uncertainty had “led certain customers to remain cautious and control capital expenditure and cash flow more carefully in 2024.”
It also said geopolitical uncertainties had disrupted its supply chain because of reduced material availability and rising prices, and that inflationary pressures had hit its suppliers.
The report meanwhile calls artificial intelligence a “key driver for growth in the semiconductor industry,” but one creating shifts in market dynamics that was not benefiting all its customers equally, creating both opportunity and risk.
“Geopolitical announcements regarding export control restrictions and customer capital expenditure cuts created volatility in the investment community,” the company said.
ASML in January reported a rise in full-year 2024 net sales to 28.2 billion euros ($30 billion) from 27.5 billion euros, and a dip in net income to 7.6 billion euros from 7.8 billion euros.
ASML share price.
Adidas sales rise 19% in the fourth quarter, beating expectations
Adidas on Wednesday reported an uptick in fourth-quarter sales that exceeded expectations, as the retailer shakes off weakness in North America and China demand.
The German sportswear giant recorded a 19% increase revenues at neutral currency rates to 5.97 billion euros ($6.34 billion) in the three-month period, ahead of the 5.72 billion euros forecast by LSEG analysts.
Operating profit came in at 57 million euros in the fourth quarter compared to a loss of 377 million euros in the same period of last year.
Read the full story here.
— Karen Gilchrist
European markets: Here are the opening calls
European markets are expected to open higher Wednesday.
The U.K.’s FTSE 100 index is expected to open 56 points higher at 8,806, Germany’s DAX up 416 points at 22,733, France’s CAC 146 points higher at 8,176 and Italy’s FTSE MIB 403 points higher at 38,282, according to data from IG.
Earnings come from Sandoz on Wednesday, while data releases include finalized European services and manufacturing activity and Italian quarterly growth data.
— Holly Ellyatt
