Europe midday: Fed's Powell rate warnings dampen sentiment

European stocks were lower on Wednesday as hawkish comments from US Federal Reserve Chairman Jerome Powell a day earlier suggesting higher and faster interest rate rises could be on the way dampened sentiment.

The pan-European Stoxx 600 index was down 0.11% at 1130 GMT after Powell told lawmakers in Washington that recent strong economic data had bolstered the case for more aggressive action to tame inflation.

"Despite the Fed’s hawkish stream of hikes over the past year, core inflation remains persistently higher at 5.6% in January and the US economy is also proving to be stronger than expected," said Interactive Investor head of investment Victoria Scholar.

"US stock markets sold off yesterday amid the prospect of further tightening while the dollar and treasury yields rose. Focus will be on Friday’s US non-farm payrolls report in which good news could be bad news; a strong headline jobs figure and wage growth could pave the way for a less accommodative 50 basis point move from the Fed in March."

"Markets are currently pricing in around a 50-50 split between chances of a 25-basis point move and a 50-basis point move at the Fed’s next rate setting meeting. Futures contracts suggest the policy rate will peak around 5.25%-5.5% in June but some are expecting the Fed Funds rate to push beyond that.”

In economic news, the eurozone economy stagnated in the final quarter of last year, according to data released on Wednesday by Eurostat.

Growth for the bloc was revised down to 0.0% quarter-on-quarter from a previous estimate of 0.1%. This was down from upwardly-revised 0.4% growth in the third quarter.

Compared with the fourth quarter of 2021, growth was 1.8%, down from a previous estimate of 1.9%.

Separate figures from Eurostat showed that employment grew 0.3% on the quarter in the final quarter of last year.

Elsewhere, German industrial production rose more than expected in January, increasing by 3.5% from the prior month. Economists had been looking for a 1.5% rise.

In another earnings deluge, shares in sportswear manufacturer Adidas shares were lower as the company cut its dividend after its split with controversial rapper Kanye West.

Shares of Darktrace fell after the British cybersecurity company lowered guidance for full-year cash flow.

Symrise shares fell after the German flavour and fragrance maker said 2023 core profit margin would be slightly below market expectations due to higher costs.

Reporting by Frank Prenesti for Sharecast.com