Europe midday: Shares tread water ahead of US inflation data

European shares were flat on Monday as investors looked ahead to US April inflation data later in the week.

The pan-regional Stoxx 600 index was flat at 520, just below Friday’s record high. The Euro 50 was up 0.03% to 4526.

Eyes will turn on Wednesday to April’s US consumer price index report, particularly as recent readings on inflation have come in hotter than expected.

“Some caution is creeping back in, amid concerns that high interest rates may have to linger for longer in the US, with the key CPI inflation reading expected this week. China’s economic recovery has hit another bump in the road, with the latest data showing scant progress,” said Hargreaves Lansdown analyst Susannah Streeter.

“A weaker-than-expected lending snapshot released in China over the weekend, indicated that the authorities still have an uphill battle in stimulating demand in the fragile economy.”

“Although the inflation reading came in largely as forecast, with consumer prices rising 0.3% in April, the contraction in new bank lending was being read as an indication that interest rates offered were still too high for companies in struggling sectors to borrow to help expand activity.

China announced it would start selling the first batch of its 1 trillion yuan ($138b) of ultra-long special sovereign bonds on Friday as looks to fund stimulus spending.

The central government will begin to issue some 30-year bonds on Friday, the Ministry of Finance said in a statement.

“There will be hopes that the sales of long-term bonds announced today will help fund stimulus spending to mend leaky parts of China’s economic plumbing, but pressure is mounting for more stimulus. However, the People’s Bank of China isn’t expected to budge much on Wednesday, with the medium-term lending rate expected to be kept on hold,” Streeter said.

In equity news, Diploma shares surged after the technical products supplier lifted earnings and margins guidance.

AP Moeller-Maersk jumped 7.1%, boosted by a rise in freight rates amid higher trade volumes and the Red Sea crisis.

Savings and retirement group Phoenix was out of favour, dropping 2% after the announcement that its chief financial officer of four years is to step down later this year. The company did not give a reason for his departure.

Reporting by Frank Prenesti for Sharecast.com