Europe close: Stoxx 600 at two-month high as inflation eases

European stock indices put in decent gains on Wednesday, finishing at a two-month high as investors shrugged off weaker-than-expected domestic data to focus on cooling inflation in the US and UK.

The Stoxx 600 index finished the session 0.4% higher at 454.47 with broad-based gains across the continent. The pan-European index has not closed above this level since 21 September.

Data released so far this week has showed that consumer price inflation slowed more than forecast in both the US and UK, while the US wholesale prices fell by their biggest amount in over three years. The figures have added to hopes that both the Federal Reserve and Bank of England will now refrain from tightening monetary policy any further, with inflationary pressures finally beginning to ease.

"Investors continue to rejoice in the hope of no more Fed rate hikes, with UK traders cheered by this morning’s CPI drop too," said Chris Beauchamp, analyst at IG. "Overall the skies have cleared dramatically for markets, and hopes of a soft landing and improved earnings have driven flows back into stocks.”

Meanwhile, better-than-expected retail sales and industrial output figures from China also helped market sentiment, along with hopes of further government stimulus for the country's struggling housing sector.

Europe data disappoints

Industrial output in the eurozone contracted more than expected in September, figures from Eurostat revealed on Wednesday. Production fell by 1.1% across the single-currency region, pulling back after a 0.6% increase in August. The market consensus was for a smaller drop of 0.7%.

"With surveys pointing to weak orders amid destocking and little signs of consumers coming to the rescue, we think that eurozone GDP will stagnate or even contract again over Q4," said Mateusz Urban, senior economist at Oxford Economics.

The data came as the Eurozone Commission cut its GDP forecasts for the eurozone for 2023 and 2024, saying that growth had lost momentum on the back of the high cost of living, weak external demand and elevated interest rates. The Commission now expects GDP growth of 0.6% for this year and 1.2% in 2024 – 0.2 percentage points below the summer forecast.

Siemens Energy and Experian jump

Munich-based energy tech giant Siemens Energy saw shares surge 5% despite reporting a €4.6bn full-year net loss on Wednesday. The company said it was reviewing the structure of its wind turbine division, Siemens Gamesa, but managed to secure a €12bn credit line from lenders, with the German government providing a loan guarantee.

In London, data services specialist and consumer credit ratings firm Experian delivered a solid set of first-half results with all regions contributing positively to growth, as it reiterated its guidance for the full year. The stock rose 7% despite an in-line set of results. Analysts at Shore Capital said, after the recent warning from sector peer TransUnion which last month reported weak quarterly figures and cut its full-year outlook, Experian's results "will come as a relief to many".

German semiconductor group Infineon Technologies was also performing well after delivering better-than-expected full-year revenues. Sales were up 15% at €16.3bn, ahead of the €16.2bn estimate.