Europe midday: Shares in cautious mood ahead of Fed rate call

18th Sep 2024 11:48

(Sharecast News) - European shares stayed in the red at midday on Wednesday as all focus remained on the US Federal Reserve's expected rate cut later in the day.

The pan-regional Stoxx 600 index was down 0.2% to 516.16 with all major bourses lower. Traders are optimistic the Fed will cut by 50 basis points - its first reduction in more than four years - with hopes boosted by upbeat US retail sales figures overnight.

In economic news, inflation in the eurozone fell to 2.2% in August from 2.6% a month earlier and confirming a flash estimate two weeks ago, according to official data published by the European Union on Wednesday.

The figure also compared with a 5.2% last August. European Union annual inflation was 2.4% in August 2024, down from 2.8% in July. A year earlier, the rate was 5.9%.

In a separate announcement, July seasonally adjusted production in construction remained stable in the euro area and increased by 0.2% in the EU compared with June, according to flash estimates.

On an annual basis production fell by 2.2% in the euro area and 2.4% in the EU.

Meanwhile, official UK data showed consumer price inflation was unchanged at 2.2% in the year to August, in line with expectations and above the Bank of England's 2% target. The bank's policy committee meets on Thursday and is expected to keep rates on hold.

Core CPI - which excludes volatile items such as energy, food, alcohol and tobacco - rose to 3.6% from 3.3% in July. This was a touch above expectations of 3.5%.

''The optimism which had been simmering on financial markets is coming off the boil ahead of crunch interest rate decisions," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"While inflation in the UK is unchanged at 2.2%, a rise in services inflation mainly due to a big leap in airfare costs is likely to keep policymakers more reticent about reducing rates again on Thursday. The FTSE 100 has fallen back slightly in early trade as uncertainty surrounds central bank policy."

"Although headline inflation in the UK remains unchanged, a creeping up in services inflation is causing niggles of concern. Costs in restaurants and hotels have fallen back but transport prices have shot up, particularly air fares. It seems that consumers are still ring-fencing available budgets for holidays and are willing to shell out for higher ticket prices amid a bunfight for seats."

In equity news, shares in air-conditioning equipment maker Beijer Ref were down as private equity group EQT sold a stake in the company at a 7.2% discount, according to media reports.

Davide-Campari shares fell as chief executive Matteo Fantacchiotti had resigned, a little over a year after his appointment, due to personal reasons.

Shares in Ubisoft led the risers as BMO Capital Markets upgraded the French video games maker to "outperform" from "market perform".

Reporting by Frank Prenesti for Sharecast.com