Europe midday: Shares rally ahead of US inflation release

European shares rallied as investors eyed US inflation data later in the day, interest rate decisions this week while German inflation decelerated from a 70 year high.

The pan-European Stoxx 600 index was up 0.67% at 1144 GMT, with major regional bourses all higher.

Economists expect a 0.3% increase to the US consumer price index on a monthly basis in November, or an annual pace of 7.3%, a slowdown from October’s 0.4% monthly increase and annual gain of 7.7%. There are expectations that core CPI will have slowed to 6.1% from 6.3%.

"More generally, the recent decline in oil and house prices could be having a deflationary effect, although the employment situation is yet to show any real signs of weakening. Any weakness in the inflation number could herald the beginning of a downward trend which would likely be well received by investors," said Interactive Investor head of markets Richard Hunter.

"The print will also be in the minds of the Federal Reserve over a two-day meeting which will culminate in the next interest rate announcement tomorrow. With the consensus almost universally agreed on a rise of 0.5%, scrutiny will fall on outlook comments which are likely to incorporate the level of the terminal rate and also an indication of how long elevated rates may stay in place."

In Germany, the consumer price index rose by 10% year-on-year in November, shrinking by 0.5% from the previous month, in line with forecasts. On an EU-harmonised basis, annual inflation was 11.3% while there was no monthly change.

Meanwhile, the ZEW business confidence survey for December showed the investor expectations index rose to -23.3 from -36.7 in November, coming in above consensus expectations for a reading of -26.4.

The current conditions index improved to -61.4 in December from -64.5 a month earlier, but was below consensus expectations of -57.0.

Meanwhile official UK data showed the number of people unemployed ticked higher in October, as real term wages fell.

The jobless rate rose 0.1 percentage point in the three months to October, to 3.7%. Growth for both average total pay - which includes bonuses - and regular pay, which excludes them, was 6.1% over the three months, the strongest increase outside of the pandemic period.

However, once adjusted for inflation, total and regular pay both fell in real terms by 2.7% year-on-year. The ONS said the fall was among the largest since comparable records began in 2001.

Average regular pay growth for the private sector was 6.9%, and 2.7% for the public sector.

Later this week, the Fed, European Central Bank and the Bank of England are all expected to raise rates by 50 basis points, rather than the aggressive 75 point hikes seen earlier in the year.

In equity news, shares in banking software company Temenos rose more than 5% after it extended a deal with an unnamed US financial institution to include its international private banking business.

Reporting by Frank Prenesti for Sharecast.com