Europe close: Stocks rise, helped by latest inflation and jobs numbers out of Germany

The new-year rally in European shares continued on Tuesday helped by better than expected inflation and labour market data from Germany.

The pan-regional Stoxx 600 was up 1.22% at 434.18, with all major bourses higher.

Germany's Dax put on 0.80% to 14,181.67 alongside, while the FTSE Mib added 1.15% to 24,436.47.

"It is certainly too much to extrapolate from one day’s trading, but the apparent enthusiasm of investors for European stocks versus their US cousins does mark a big change from the pre-pandemic years," said IG chief market analyst Chris Beauchamp.

"Even rhetoric from the ECB about the need for more sharp rate rises doesn’t seem to have deterred investors, which suggests that the bearishness of 2022 seems to have been carried a little too far."

Helping investor sentiment, German harmonised consumer prices were reported as down by 1.2% month-on-month in December.

However, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, wasn't as enthusiastic as government bond investors.

"Granted, the fall in the headline adds to the evidence that inflation is now past its peak," Vistesen said in a research note sent to clients.

"But to the extent that this is driven partially by fiscal measures, amid rising core inflation, we can’t see how it provides much relief for the ECB."

Indeed, Vistesen estimated that year-on-year core German CPI accelerated from November's 5.1% clip to 5.6%.

In parallel, Germany's Federal Labor Agency said that the country's rate of unemployment declined by one tenth of a percentage point in December to 5.5%.

The latest CPI figures out of the euro area's largest economy appeared to contribute to German 10-year bund yields giving back some of their late December gains, a move that contributed to similar selling pressure in euro/dollar which lost 1.14% to 1.0545.