Market Analysis

Investors are poised to gain insight this week into whether the recent surge in interest rates is still bolstering profits for European banks or if the momentum in share prices will begin to falter.

Lloyds Banking Group will kick off the reporting season for major European lenders on April 24, followed by BNP Paribas, Deutsche Bank, and Barclays the next day.

After a prolonged period of low interest rates, the recent uptick in borrowing costs has significantly impacted bank profits in Europe, driving up shareholder payouts and sparking a rally in bank shares.

Christian Edelman, Co-Head of Europe at Oliver Wyman, noted the fundamental shift as Europe moves away from negative rates, which continues to shape the outlook for banks.
On Monday, Germany's BDI expressed concern about the trajectory of industrial production this year, cautioning that it is likely to decline once again, with exports projected to stagnate. 

Siegfried Russwurm, President of BDI, highlighted the persistent challenges facing German industry, citing cost and demand shocks, as well as fluctuations in energy prices and inflation, as ongoing hurdles.

At the Hannover Messe, Russwurm outlined the BDI's forecast of a 1.5% decrease in production for 2024, while exports are anticipated to remain unchanged following a 1.5% decline in 2023. Despite some signs of moderate recovery, Russwurm emphasized the worrisome downward trend in production figures over recent years.

Similarly, the VDMA Engineering Association acknowledged a bottoming out of the slump in foreign orders but maintained its prediction of an overall drop in production by 4% this year. VDMA President Karl Haeusgen echoed concerns about lingering negative factors impacting the industry, despite some tentative signs of improvement.

Paraphrasing text from "Investing" all rights reserved by the original author.