Europe midday: Stocks little changed as investors mull inflation data

European equity markets were little changed on Wednesday as investors digested news that the eurozone has escaped deflation, while the euro weakened.

At midday, the benchmark Stoxx Europe 600 index and France’s CAC 40 were flat at 373.25 and 4,885.71, respectively, while Germany’s DAX rose 0.13% to 11,928.60.

Meanwhile oil prices retreated from previous gains, with Brent crude down 0.47% to $56.39 per barrel and West Texas Intermediate 0.46% lower at $54.08.

The euro was down 0.28% against the dollar to 1.0506 and fell 0.11% versus the pound to 0.84387.

Two-year German government bond yields were lower for a third consecutive session as some investors headed towards the safe haven asset.

On the data front, inflation in the eurozone rose 1.8% in January compared to a 1.1% jump the month before and close to the European Central Bank’s target of just below 2%.

Consumer prices in the 19 countries that share the euro were down 0.8% on a monthly basis, also in line with market expectations. Core inflation, which excludes unprocessed food and energy prices, was unchanged from December at 0.9%.

Over in Germany, the IFO Institute’s business climate index rose to 111.0 from 109.9 in January, beating analysts’ expectations for a decline to 109.6. The expectations index edged up to 104.0 from 103.2 the month before, surpassing expectations of 103.0.

The current assessment index jumped to 118.4 from 116.9, comfortably beating estimates of 116.7 and marking the highest level since August 2011.

Meanwhile, political risks were still concerning investors as recent polls showed that far-right Front National’s Marine Le Pen extended her lead in the race to be France’s next president, at the cost of Les Républicains’ François Fillon who is embroiled in a payroll scandal.

“The spread between German and French two year government bond yields swelled to its highest level since the financial crisis, indicating deepening investor concern about eurosceptic Le Pen’s chances of winning the presidency of France. Yesterday’s fundamental data was actually very good for the euro however, as French, German, and eurozone services and manufacturing purchasing managers’ indices all showed a highly satisfactory rate of reported output growth, although it was of little help to the euro,” said analysts at Monex Europe.

In corporate news, Lloyds Banking Group shares rallied after it more than doubled full year pre-tax profits to £4.2bn from £1.6bn in 2015 as it announced a special 0.5p-a-share dividend.

Thyssenkrupp gained 4.77% after the German conglomerate said it will sell its Brazilian plant for $1.3bn.

Airbus was down 1.03% after the airplane maker posted a 3.6% fall in earnings before interest and tax to €3.96bn, more than the €3.80bn expected following production challenges for civilian jets and a weaker performance from its defence arm.

Bayer fell 2.4% after the German chemical company reported a 26% drop in fourth-quarter profit to €453m due to one-off expenses.