Europe close: Stocks rise as investors digest mixed inflation data

European stocks finished with moderate gains on Friday as investors digested a batch of mixed economic data from both sides of the Atlantic.

Eurozone inflation accelerated more than expected in May, while US data showed the coolest rate of core inflation this year and a softer-than-expected reading of personal spending in April.

Europe's Stoxx 600 index closed in positive territory for the second straight day, rising 0.3% to 518.17, but still remains down 0.5% on the week. Markets were rising in London, France and Milan, but were flat in Frankfurt and slightly lower in Madrid.

Eurozone inflation rose in May, according to official data published on Friday, as prices stubbornly refused to shift and indicating a tougher path ahead for the European Central Bank's monetary policy, although the rate cut pencilled in for next month was likely to go ahead.

The annual inflation rate across the eurozone is expected to be 2.6% in May, statistics body Eurostat said in a flash estimate, up from 2.4% in April and March, driven by rising prices in the services sector. Economists had expected a smaller rise in inflation, to 2.5%, raising concerns with an interest rate cut expected by the ECB next week.

Over on Wall Street, markets opened higher initially but dropped sharply after a few hours' trade. According to the US Department of Commerce, personal income and spending rose at a month-on-month clip of 0.3% and 0.2% in April respectively. Economists had penciled in increases of 0.3% for both.

Meanwhile, the monthly change in the price deflator for US personal consumption expenditures was up by 0.3%, as expected. However, at the core level PCE price gains clocked in at 0.2%, recording their slowest month-on-month gain so far this year and slightly below the 0.3% increase expected.

"While cooler US inflation provided the good news for the afternoon, hotter eurozone price data and developments in Ukraine meant that investors remained on edge," said Chris Beauchamp, chief market analyst at IG.

“NATO countries have indicated their willingness to allow Ukraine to use their weapons on Russian territory, and now the world waits to see how Russia will respond. Combined with the French decision to deploy military advisors in Ukraine, it looks like spillover risks from the conflict are back on the agenda for investors," Beauchamp said.

Market movers

France and Italy-listed semiconductor giant STMicroelectronics on Friday announced plans to build the world first fully integrated silicon carbide (SiC) facility in Italy, helping shares to inch higher. The build will require €5bn of investment, including €2bn support provided by the Italian government as part of the EU Chips Act.

Telecom Italia shares fell 3% as US investment firm KKR won unconditional EU antitrust approval on Thursday for its up to €22bn acquisition of TIM's fixed-line network.

Shares in JD Sports Fashion slumped 5% in London as the company held guidance amid "volatile" trading conditions as annual profits fell but revealed that first-quarter like-for-like sales were down 0.7%, reflecting the woes of its major supplier Nike.

Flutter Entertainment fell 4% as its finance chief left with immediate effect as the company moved its listing to the US.

Car makers were performing well across the continent, with Saab, Volvo and Aston Martin Lagonda all putting in decent gains.