Europe midday: Shares trim losses as investors digest data dump, eye rate moves

European shares trimmed morning losses but were still in the red as investors digested German GDP data, an EU economic survey and looked ahead to central bank rate decisions in the US, UK and eurozone this week, with further hikes forecast.

The pan-European Stoxx 600 index was down 0.69% at 1145 GMT with all regional bourses lower. Asian shares were mixed, with the crisis surrounding Indian conglomerate Adani continuing to batter the firm’s stock after US short-seller Hindenburg issued a report hammering its financial practices.

Interactive Investor analyst Victoria Scholar said “peak interest rates appear to be approaching as inflation levels finally start to cool”.

“This morning Spain’s January inflation rate fell by 0.3% month-on-month versus a rise of 0.2% in the previous month but its annual rate rose slightly from a 13-month low to 5.8% year-on-year.”

In the eurozone, economic sentiment rose to a seven-month high in January on more optimism across all sectors except construction, with inflation expectations among consumers and companies both sharply down.

The European Commission's Economic Sentiment Index rose to 99.9, above an upwardly revised 97.1 in December -- the highest value of the index since June 2022.

The rising optimism underlines expectations that an expected economic downturn in the 20 countries sharing the euro, if there is one at all, is likely to be shallow, despite the energy price and cost of living crises and the war in Ukraine.

The monthly survey showed inflation expectations among consumers falling to 17.7 from 23.2 in December, well below the long-term average of 20.0.

Meanwhile, the German economy unexpectedly shrank in the fourth quarter, in a sign that Europe's largest economy will probably go into recession, albeit shallower than initially feared.

Gross domestic product decreased 0.2% quarter on quarter in adjusted terms, the federal statistics office said. A Reuters poll of analysts had forecast the economy would stagnate.

In equity news, shares in Philips rose after the Dutch health technology company said final-quarter revenue beat estimates and that it was axing 6,000 jobs to restore profitability.

Reporting by Frank Prenesti for Sharecast.com