Europe close: German and French stocks hit new record highs

(Sharecast News) - European equity markets rose on Tuesday with strong gains seen by banking stocks in Spain and Italy, while France's CAC 40 and Germany's DAX both set new record highs - helped by some improving macro news. The pan-European Stoxx 600 index was up just 0.2%, but that masked some big gains in Madrid (+1.5%) and Milan (+1.3%), while the CAC 40 in Paris rose 0.5% to a new closing high of 7,677.47 and the DAX in Frankfurt edged 0.2% to a fresh closing peak of 16,972.34.

In macro news, the eurozone managed to avoid a technical recession after official flash estimates showed the economy flatlined in the last three months of 2023. The reading of zero GDP growth compares with a 0.1% contraction in the third quarter, EU statistics agency Eurostat said, and the 0.1% contraction expected by economists.

While slightly better than expected, the data confirmed that growth remained depressed at the end of last year and that the recovery will be slow. However, according to economists at Pantheon Macroeconomics, the figures will likely "support a dovish shift at the ECB".

Meanwhile, the International Monetary Fund said that a global soft landing is a possibility as its raised its projections for economic growth in 2024 and 2025. The IMF's January update to its World Economic Outlook report puts world GDP growing at 3.1% in 2024, in line with the growth seen in 2023 but up 0.2 percentage points (pp) from the IMF's previous forecast in October. 2025 growth is still pencilled in at 3.2%.

Oil prices gained 0.9% with Brent rising to $82.54 a barrel after state-run Saudi Aramco dropped a plan to increase daily production capacity at the request of the energy ministry. In a major policy u-turn, the world's largest oil company producer ditched plan's to boost maximum sustainable production capacity from to 13 million barrels a day from 12 million by 2027.

Spanish and Italian banks gain

Banking stocks were in favour on Tuesday, especially those trading on Spain's Ibex 35 and Italy's FTSE MIB indices.

Banco Bilbao Vizcaya Argentaria, Banco de Sabadell, CaixaBank and Banco Santander were all putting in decent gains in Madrid, while Intesa Sanpaolo, Banco BPM, Banca Monte dei Paschi di Siena and BPER Banca performed strongly in Milan.

London-listed drinks giant Diageo was trading 1% higher after pointing to improving trading conditions in the latter part of the financial year following falling sales in the first half.

Meanwhile, Deliveroo slumped 3% after Delivery Hero sold its entire 4.5% stake in the company in a placing. Delivery Hero was also down on the news. Delivery Hero was the heaviest faller on the Stoxx 600, falling over 5%.