European markets start New Year on high note

Fireworks explode over the Arc de Triomphe as France ushers in 2023. ©AFP

World (AFP) - European stock markets started the New Year on a high note on Monday after a rough 2022 but the IMF chief warned that a third of the world economy faces recession in 2023.

The Paris CAC 40 surged 1.9 percent and the Frankfurt DAX jumped more than one percent but London, Wall Street and oil markets were closed for the New Year holiday.

Most Asian stock markets were also shut.Of those that opened, Jakarta was flat while Seoul fell and Mumbai rose.

Wall Street recorded its worst annual drop since 2008 last year while Hong Kong had its biggest drop since 2011 and Tokyo saw its first annual fall since 2018.

Paris and Frankfurt also had their largest annual falls since 2018 while London bucked the trend as it finished almost one percent higher for the year.

Investors were rocked last year by Russia's invasion of Ukraine in late February, soaring inflation and rising interest rates.

Inflation has been fuelled by surging food and energy prices, but European gas prices, which had climbed to a record 345 euros per megawatt hours in March, fell by more than four percent on Monday to 73 euros -- its lowest level since the war started.

Stock market sentiment was buoyed on Monday by a drop in German and French bond yields -- the rate paid by governments to borrow money.

But the head of the International Monetary Fund, Kristalina Georgieva, said in a US television interview aired on Sunday that 2023 will be "tougher than the year we leave behind" for the world economy.

"Why?Because the three big economies, US, EU, China, are all slowing down simultaneously," she told CBS's "Face the Nation" programme.

"We expect one third of the world economy to be in recession," Georgieva said.

'very severely hit'

Although the United States may avoid it, she said half of the 27-nation European Union will be in recession in 2023 as the bloc is "very severely hit" by the Ukraine conflict.

China's economy, which slowed "dramatically" due to its zero-Covid policy in 2022, will likely be at or below global growth for the first time in 40 years.

The new Covid outbreak in China -- where authorities loosened restrictions after a wave of protests -- poses fresh challenges for the world economy.