European Shares Steady Ahead of Inflation Data

By Pranav Kashyap

European shares were largely steady on Tuesday ahead of key inflation data for the region later in the day.

The pan-European STOXX 600 was up 0.1% at 523.42 after logging its worst day in over a week on Monday.

Tech stocks rose 1%, but this was offset by nearly 1% losses in luxury firms. Last week, European luxury firms rallied, boosting the STOXX 600 to new highs, driven by Chinese stimulus measures.

“It’s standard to see a pausing in a bullish run, given the strength of the gains that we saw last week,” said Fiona Cincotta, senior market analyst at City Index.

Energy stocks fell by 0.9%, dragged down by a 5.8% decline in biofuels maker Neste Oyj.

Investors are looking ahead to the Eurozone’s flash inflation figures for September, due at 0900 GMT, which may influence the European Central Bank (ECB) on whether to lower interest rates at its next meeting in two weeks. ECB President Christine Lagarde said on Monday that the bank is increasingly confident inflation will fall to its 2% target.

Market participants will also be monitoring speeches from ECB officials for further clues on potential rate cuts.

Meanwhile, PMI data showed a decline in manufacturing activity across the eurozone at the fastest pace this year in September. The German manufacturing sector also contracted at its fastest rate in a year, while France’s sector continued to contract and Italy’s manufacturing activity declined for the sixth consecutive month.

Among individual stocks, Covestro jumped 3.8% after Abu Dhabi National Oil Company (ADNOC) confirmed plans to acquire the German chemicals producer for 14.7 billion euros ($16.4 billion). Anheuser-Busch InBev gained 2.3% following an upgrade by Citigroup from “neutral” to “buy”.

In the U.S., Federal Reserve Chair Powell indicated that the central bank would likely stick to 25 basis-point cuts moving forward, as new data raised confidence in economic growth and consumer spending. “Markets building hopes of another 50 bp rate cut was overdone and we’ve seen that optimism dialed back,” stated Cincotta.