Here’s why the DAX, CAC 40, FTSE MIB, Stoxx 50 are rising

European stock indices continued their recovery on Thursday after an encouraging inflation report from Europe. In Germany, the DAX 40 index surged to a high of €16,200, the highest point since August 1st. It has jumped by more than 10% from the lowest point in November.

German equities rallied after a report by the statistics agency said that the headline inflation dropped to 3.2% in November. It dropped by -0.4% on a YoY basis as the price of energy sources continued falling.

In France, the blue-chip CAC 40 index jumped to €7,290, its highest point since September 20th. Like the DAX, it has jumped by almost 10% from its lowest point in October. In France, consumer inflation dropped at a faster pace than expected. It stood at 3.8% in November while the economy contracted by 0.1% in the third quarter.

In Italy, the FTSE MIB index jumped by 0.5%0 €29,835. In Europe, the closely watched Euro Stoxx 50 index jumped to €4,381, the highest level since August 11th.

DAX index vs CAC 40 vs Stoxx 50 indices

These indices surged after data revealed that European inflation was falling. According to Eurostat, the headline Consumer Price Index (CPI) dropped by 0.5% in November, translating to a YoY increase of 2.4%. Core inflation fell to 3.6% during the month.

These numbers mean that the European Central Bank (ECB) is succeeding in reducing inflation, which peaked at 10.5% in 2022. Therefore, if this trend continues, there is a likelihood that prices will hit the bank’s target of 2.0% in the coming months.

Therefore, most economists now believe that the bank will start cutting interest rates in the first half of 2023. Besides, there are signs that the economy could sink into a recession as productivity falls.

These indices have also rallied because of the situation in the United States where inflation growth has dropped to 3.2% from last year’s high of 9.1%. As a result, most analysts expect that the Fed will slash rates in June next year.

The European financial market is going through a challenging period as liquidity dries up. A good example of this is in Austria, where Signa Group has filed for bankruptcy. Signa is a huge company in the real estate sector. Other property groups in the region are also in trouble as values drop.