Europe midday: Stoxx holds despite rise in EZ inflation

31st Jul 2024 11:33

(Sharecast News) - European shares held gains on Wednesday as investors digested an unexpected rise in eurozone inflation and looked ahead to rate decisions from the US and UK amid another dump of corporate earnings.

The pan-regional Stoxx 600 index was up 0.94 at 518 in early deals. Investors were also taking stock of a rate rise from the Bank of Japan - only its second increase since 2007.

The US Federal Reserve is expected to keep rates on hold as it ends a two-day policy meeting, while the Bank of England meets a day later for its latest decision.

Eurozone prices increased marginally faster than anticipated in July, a development that might cause the European Central Bank (ECB) to reconsider its plans for further rate reductions.

Inflation within the single currency bloc increased to an annual rate of 2.6% in the year leading up to July, a rise from 2.5% in June, according to a flash estimate from Eurostat, the EU's statistical office.

It was also higher than the 2.4% expected by economists, and above the ECB's 2% target.

Core inflation remained steady at 2.9% for a third consecutive month. Services inflation eased marginally to 4% and food inflation also eased slightly. Energy prices were up 1.3% year on year, and helped to drive the rise.

"In a week that was always going to be loaded full of risk across financial markets, European markets have appeared largely unscathed despite a sharp pullback for US tech giants yesterday," said Scope Markets analyst Joshua Mahony.

"Instead, European traders have been able to focus on the positives, with the FTSE 100 rising into a two-month low ahead of a potential rate cut from the Bank of England tomorrow."

"However, the latest eurozone inflation gauge gave bulls less to celebrate, with both core and headline inflation coming in above expectations. The final stretch back down to 2% remains a difficult hurdle to overcome, and today's report will likely create jitters for those expecting a September rate cut that is currently being priced at a 68% chance."

In equity news, shares in coffee and tea company JDE Peet's surged as the company raised its full-year sales growth forecast, after reporting half-year results above analysts' expectations.

HSBC interim results beat analyst expectations, while the Asia-focused bank also unveiled a $3bn buyback and said farewell to CEO Noel Quinn.

Just Eat shares rose as the food delivery company said it was buying back €150m in shares after a rise in interim core profits.

Shares in ASML jumped after a report that new US exports rules for semiconductor equipment with China would not affect certain allies, including the Netherlands.

French shopping centre operator Klepierre rose after the company posted positive first-half results and a 2% increase in EPS guidance.

Aena fell as the Spanish airport operator posted in-line second-quarter results after a series of better-than-expected earnings announcements.

Reporting by Frank Prenesti for Sharecast.com