Europe midday: Shares extend gains after EZ producer prices fall again

European shares extended gains on Tuesday after a further fall in eurozone producer prices and as investors shrugged off surprise output cuts by OPEC and other countries.

The pan-European Stoxx 600 index was up 0.7% at 1045 GMT with all major bourses higher after a muted day on Monday as the oil price spike stoked renewed fears of inflation.

According to Eurostat, the statistical office of the European Union, industrial prices fell by 0.5% compared to January 2023, when they fell by 2.8%, and by 0.6% in the wider bloc. Analysts had been looking for a 0.3% contraction in February the eurozone.

Year-on-year, industrial producer prices jumped 13.2% and 14.5% in the eurozone and EU respectively.

The month-to-month fall was driven by the energy sector, where prices dropped by 1.6%. Prices also fell in intermediate goods, down 0.1%, but increased by 0.3% for capital goods, 0.4% for durable consumer goods and 0.6% for non-durable consumer goods.

Sentiment was also boosted after the Reserve Bank of Australia decided to pause rate hikes after 10 consecutive rises.

“The surprise production cut from OPEC+ continues to stoke concerns around inflation, with brent crude trading over $85 a barrel. There are some outside concerns this could encroach on the $100 mark once more, which would have legitimate ramifications for monetary policy and has already led to a reduction in short positions in oil,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates.

In equity news, L'Oreal shares edged ahead after the cosmetics group struck a deal with Brazil's Natura & Co to buy Aesop, its Australian luxury brand, at an enterprise value of $2.53bn.

Bayer was up after a Delaware judge dismissed Merck's lawsuit seeking to hold Bayer responsible for more talc-related liabilities stemming from its purchase of Merck's consumer care business in 2014.

Energy stocks fell after strong gains on Monday, with Equinor, GALP and Aker BP all down.

Reporting by Frank Prenesti for Sharecast.com