European Stocks Close Higher As U.S. Inflation Data Fuels Rate Cut Hopes

(RTTNews) - European stocks closed on a bright note on Tuesday with investors reacting positively to U.S. consumer price inflation data that raised optimism about the outlook for interest rates.

Data showing a drop in German inflation, weak U.K. employment and wage growth data spurred hopes of rate cuts by the European Central Bank and the Bank of England.

Data from the Labor Department showed the U.S. consumer price index climbed by 0.4% in February after rising by 0.3% in January.

Excluding food and energy prices, core consumer prices also rose by 0.4% in February, matching the increase seen in January. Economists had expected core prices to rise by 0.3%.

The report also said the annual rate of consumer price growth ticked up to 3.2% in February from 3.1% in January. The Meanwhile, the annual rate of core consumer price growth slowed to 3.8% in February from 3.9% in January. Economists had expected the pace of growth to decelerate to 3.7%.

While core price growth slowed by slightly less than expected, the slowdown still seems to have added to optimism about the outlook for interest rates.

The pan European Stoxx 600 climbed 1%. The U.K.'s FTSE 100 gained 1.02%, Germany's DAX surged 1.23% and France's CAC 40 advanced 0.84%, while Switzerland's SMI ended 0.66% up.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Norway, Poland, Russia, Spain and Sweden ended with sharp to moderate gains.

Portugal and Turkiye closed weak.

In the UK market, Entain, JD Sports Fashion, Prudential, HSBC Holdings, IHG, Smiths, ICP, Smurfit Kappa Group, Beazley, Rio Tinto, Rolls-Royce Holdings, Marks & Spencer, Weir Holdings, Ocado Group and 3i gained 2 to 4%.

British American Tobacco, Barclays, Associated British Foods, Pearson, Haleon, Natwest Group, Intertek, Compass Group, Melrose Industries and Howden Joinery also ended sharply higher.

Persimmon shares ended down by 3.7% after the company narrowly missed market views for last year's pretax profit and revenue.

Severn Trent, SSE, National Grid, Centrica, Mondia, United Utilities, Unite Group, Croda International, St. James's Place and DS Smith ended down 1 to 2%.

In the German market, Porsche gained 4.25% reversing an early slide after the luxury carmaker said it expects lower returns in 2024.

Deutsche Bank, Infineon, Zalando, Volkswagen, BMW, Commerzbank, Merck, HeidelbergCement, Daimler Truck Holding, Puma, Henkel and SAP gained 2 to 5%.

Adidas, Covestro, Brenntag, Allianz, Mercedes-Benz, Siemens and BASF also ended notably higher.

MTU Aero Engies ended more than 2% down. E.ON, Bayer, Symrise and Vonovia also closed weak.

In Paris, Renault rallied 4.5%. Alstom, ArcelorMittal, WorldLine, Legrand, Carrefour, AXA and Stellantis gained 2 to 4%.

Saint Gobain, Societe Generale, Safran, STMicroElectronics, Publicis Groupe, Thales, Eurofins Scientific, Michelin, Kering and BNP Paribas advanced 1 to 2%.

Unibail Rodamco, Veolia, Teleperformance and Orange lost 1 to 2%.

German consumer prices posted its weakest rise since mid-2021, as initially estimated, on weaker energy and food prices in February, final data from Destatis revealed.

The consumer price inflation slowed to 2.5% in February from 2.9% in January. The last time inflation was lower was in June 2021, when it stood at 2.4%.

Excluding energy and food, core inflation was 3.4%, the same as in January and matched flash estimate. This was well above the European Central Bank's 2% target. On a monthly basis, inflation doubled to 0.4%, in line with estimate, from 0.2%.

Data published by the Office for National Statistics showed the UK unemployment rate increased in January and wage growth slowed.

The ILO jobless rate rose to 3.9% in three months to January from 3.8% in the prior period. The rate was seen unchanged at 3.8%. At the same time, the employment rate came in at 75%.

Average earnings excluding bonus gained 6.1% in three months to January. The rate was forecast to climb 6.2%, the same rate as seen in the preceding period. Including bonus, earnings increased 5.6%, slightly slower than economists' forecast of 5.7%.