European markets close lower as ECB members talk rate cuts at Davos; Hugo Boss down 9%

Shares of Harbour Energy rose over 6% after analysts at Bank of America reportedly described the company as “a sleeping giant.”

The London-listed stock jumped toward the top of the European benchmark on the news.

— Sam Meredith

Börje Ekholm, CEO of Ericsson, discusses the company’s $14 billion deal with AT&T, the 5G cycle, and the outlook for 6G.

Steven van Rijswijk, CEO of ING Group, explains the resilience of euro zone economies amid interest rate hikes and gives his inflation outlook for 2024.

German fashion firm Hugo Boss was down 13% in mid-morning trade, after its fourth-quarter results missed analyst estimates.

The company saw earnings before interest and taxes up 17% to 121 million euros ($131.7 million), lower than an average forecast of 129 million euros.

It said EBIT was likely to come in 22% higher in final full-year results due March.

“The double-digit top- and bottom-line improvements in the important final quarter are all the more remarkable considering the current challenging global market environment,” CEO Daniel Grieder said in a statement.

2024 will be a “mixed year” for investment, with the picture set to improve in the second half of the year, EY CEO Carmine Di Sibio told CNBC in Davos, Switzerland.

“We think the latter part of the year, things will get better,” he said, stressing that “between now and June, things remain tough.”

In that same tone, he played down a perceived burst in toward the end of 2023, noting that “some of the equity markets were a little exuberant, just before Christmas, because I do think there’s still some time to go.”

The macroeconomic outlook remains guided by uncertainty over when central banks will begin to reduce their interest rates, following multiple months of hikes in response to soaring inflation. Di Sibio signaled that, once that the highly anticipated rate cuts become “definitive,” the company’s clients will resume higher investments, predicting that “globally things will change.”

He also recognized that geopolitics are impacting the business landscape, including supply chain concerns.

— Ruxandra Iordache

Shares of Ocado were up 5.4% in morning trade after the grocery delivery firm announced 10.9% year-on-year retail revenue growth for the quarter to Nov. 26, with volumes up 4.8% and record Christmas sales.

It also provided guidance that it returned to profit in the full-year 2023, despite a fall in volumes from a “drag in the first half due to the unwinding from the pandemic and the cost of living crisis.”

Chris Beckett, head of equity research at Quilter Cheviot, said its joint venture with retail group Marks & Spencer had delivered a “solid trading update” which “highlights how the business is slowly turning things around to point in the right direction.”

“Customers numbers, sales and basket value are all up and slightly better than rivals, and although customers are buying slightly fewer items, there is a good route presented to get to higher profit margins. This will be crucial to watch for the rest of the market, as Ocado is looking use its technology and scale to prove that grocery retail can be a higher margin business than it currently is for the incumbents.”

The results also reflect a broader retail trend of post-Covid normalization, he added.

The valuations of some private companies are ‘going nuts again,’ according to Cisco‘s chief executive.

Chuck Robbins said the valuations for companies focusing on new technologies, such as artificial intelligence (AI), had returned to the heyday seen during the low interest rate environment of the pandemic.

“When you get into [generative] AI and some of these other things, we are seeing some of the private valuations are going nuts again,” he said during a CNBC-moderated panel event at the World Economic Forum in Davos, Switzerland.

“It is ironic to me that we’re so quickly doing this after what we experienced 48 months ago. It’s just incredible,” he said.

— Karen Gilchrist

U.K. wage growth, excluding bonuses, slowed down to 6.6% in the September-November period, down from 7.2% in the three months to October and in line with a forecast of economists polled by Reuters.

Job vacancies were 49,000 lower from October to December, down for the 18th straight data release.

The number of payrolled employees was down 24,000 in December, according to a provisional estimate.

“Another big drop in wage growth in November supports our view that domestic inflationary pressures are fading fast. But the tightness of the labour market will probably mean that the Bank of England maintains its hawkish bias at its policy meeting in February,” Ashley Webb, U.K. economist at Capital Economics, said in a note.

— Jenni Reid

It is “premature” to conclude that central banks will cut rates “aggressively” this year, according to Gita Gopinath, first deputy managing director of the IMF, speaking on CNBC’s “The High Rate Reality” panel at Davos.

While inflation has come down, “the job is not done,” she added, with tight labor markets in the U.S. and Europe. The IMF expects interest rates to come down in the second half of the year.

Compared to the period after the global financial crisis in 2008, Gopinath said she expected rates to be higher in the next three to four years.

— Lucy Handley

French central bank chief François Villeroy de Galhau stressed that it was not possible to say in which season the European Central Bank may cut interest rates this year.

“About the season, why don’t I say anything? I said it should be this year, barring major surprises. But…we are not calendar driven, we are data-driven,” he said during a CNBC-moderated panel event at the World Economic Forum in Davos, Switzerland.

On the path of inflation, he added: “It’s too early to declare victory … the job is not yet done. That said, interest rate tightening has been quite successful so far, more successful than we thought even at Davos one year ago.”

“What we can see on both sides of the Atlantic is something like a soft landing so far.”

Inflation in the euro zone has been on a “very positive” trajectory, Portugal’s central bank governor Mario Centeno said Tuesday, even as his peers on the European Central Bank Governing Council struck a more hawkish tone in recent days.

“We remain data dependent, that’s how we frame our decisions … One of the greatest successes of the ECB lately is being able to anchor expectations for inflation in the medium term at 2%, and this is because we are credible, we have to remain so,” Centeno said.

Read the full story.

— Jenni Reid

Bank of America has upgraded a wind energy stock from “neutral” to “buy” citing an improved risk-reward profile.

The upgrade and price target boost come after the stock has already staged a recovery of more than 50% from its lows last year.

The Wall Street bank is also bullish on the stock after a series of negative headlines regarding project delays and cost overruns dented sentiment for the wind energy sector in 2023.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Asian markets may have had a rocky 2023, but those looking for pockets of opportunities in the region can look to Morgan Stanley’s selection of “alpha” stocks.

Alpha stocks are those with the ability to beat the market.

The stocks – which are from Asia Pacific ex-Japan – have a market capitalization of over $5 billion and were ranked on factors such as quality, value and sentiment, Morgan Stanley’s analysts wrote.

CNBC Pro subscribers can read about Morgan Stanley’s top 10 notable ideas here .

— Amala Balakrishner

European markets are expected to open higher Thursday.

The U.K.’s FTSE 100 index is expected to open 1 point higher at 8,369, Germany’s DAX up 4 points at 18,681, France’s CAC 14 points higher at 8,101 and Italy’s FTSE MIB up 30 points at 34,559, according to data from IG.

Earnings are set to come from Julius Baer, Acciona, Nationwide Building Society, Rolls-Royce, Aviva and Wizz Air. Preliminary euro zone services and manufacturing activity data for May is due, as are consumer confidence figures for the single currency area.

— Holly Ellyatt