Europe midday: Shares flat as investors digest Fed, earnings news
European markets were just above the flatline on Thursday as investors digested minutes released by the US Federal Reserve showing more interest rate hikes would be used to fight inflation, while a corporate earnings dump also drove sentiment.
The pan-European Stoxx 600 index was up 0.05% with most major markets higher, bar Britain's FTSE 100, which was down 0.39% as results at Mondi and BAE Systems were poorly received.
Inflation “remained well above” the Fed’s 2% target and the labor market “remained very tight, contributing to continuing upward pressures on wages and prices,” according to the minutes.
OANDA analyst Craig Erlam said that while he took Fed commentary "with a relative pinch of salt", keeping financial conditions tight "may well indicate that at least a few hikes are planned and any hope of cuts this year are, as communicated, slim".
"That could be the difference between a recession and a soft landing, although again, I take these warnings with a large pinch of salt. If January proves to be a blip in the data due in part to warmer weather - and the fact that bumps in the road back to 2% were always highly likely - we could quickly see market pricing shift once more," he said.
"And we'll get another full round of data before the next meeting which will give us a much better idea of whether this is a blip or a trend."
In economic news, the cost of living in the eurozone fell slightly more slowly at the start of 2023 than previously thought.
According to Eurostat, the single currency bloc's consumer price index declined at a month-on-month pace of 0.2%. That brought the annual rate of increase lower from 9.2% in December to 8.6% for January (Preliminary: 8.5%).
It was a similar story at the core level, which excludes food, energy, alcohol and tobacco with year-on-year core CPI printing at 5.3% (Preliminary: 5.2%) , against 5.2% in the month before.
In earnings news, aircraft engine maker Rolls-Royce surged after reporting a rise in operating profits as the rebound in post pandemic international travel boosted flying hours for its engines.
Animal genetics company Genus was also higher on increased annual profit.
Paper and packaging firm Mondi fell after warning of softer demand and pricing in the current year, despite posting higher profits in 2022.
BAE Systems was also in the red despite hailing a record order intake for 2022 and posting a rise in sales and underlying earnings amid an "elevated threat environment".
French hospitality group Accor rose slightly higher as full-year operating profit grew from to €543m from €53m, driven by domestic guests, while hotel performance in the second half of the year exceeded 2019 levels in all regions but Asia, where China's zero-Covid restrictions weighed.
Reporting by Frank Prenesti for Sharecast.com