Europe midday: Shares down on rate rise fears, German PPI

European shares were lower on Friday as investors digested US PPI and jobs data that increased expectations of more interest rate hikes this year.

The pan-European Stoxx 600 index was down 0.75% at 1154 GMT following weaker sessions in the US and Asia.

US data on Thursday showed monthly producer prices accelerated in January by 6% compared with expectations of a 5.4% increase. Meanwhile the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

The numbers prompted St Louis Federal Reserve chief James Bullard to say inflation was still “too high" and that he wouldn’t rule out supporting a 50 basis point rise at the central bank’s next policy meeting.

"Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low," he said.

In Germany, producer prices rose more than expected in January, though the rate of increase slowed for the fourth consecutive month in a further sign that inflation in Europe's largest economy could be reversing.

Producer prices of industrial products were up 17.8% on the same month last year, the Federal Statistical Office reported, compared with analysts' expectations for the rate of increase to ease to 16.4%.

In the UK, retail sales volumes unexpectedly rose by 0.5% in monthly terms in January after a 1.2% fall in the prior month, but the overall picture remained one of weak demand from inflation-hit consumers, official data showed on Friday.

Economists had been expecting a 0.3% fall. Non-food stores sales rose 0.6% over the month following a 2.5% decline in December 2022. Feedback from retailers suggested that growth was supported by sales promotions, the ONS said. Still, sales remained 2.9% below their pre-pandemic levels.

In equity news, shares in Britain’s NatWest bank fell despite the lender posting its best annual profit since the industry caused the financial crash of 2008. Profits surged by 33.5% to £5.1bn and an £800m share buyback was also announced.

Iconic German car maker Mercedes-Benz gained after reporting higher 2022 earnings.

Reporting by Frank Prenesti for Sharecast.com