Europe midday: Stocks little changed following previous gains, euro weakens

European stocks were little changed on Thursday after gains in the previous session, as data showed that eurozone inflation grew 2% as expected, and the euro weakened.

On Wednesday, stocks rallied following suggestions by US Federal Reserve officials that there would be a hike in interest rates at the central bank’s next meeting on 14-15 March and a possibility of $1trn spent on infrastructure by US President Donald Trump.

At midday, the benchmark Stoxx Europe 600 index was down 0.1% to 375.30, Germany’s DAX was flat at 12,067.38 and France’s CAC 40 rose 0.13% to 4,967.36.

Meanwhile, Brent crude fell 0.85% to $55.88 per barrel and West Texas Intermediate was down 0.86% to $53.37.

In currency markets, the euro was down 0.24% against the dollar to 1.0522 and was 0.11% weaker versus the pound to 0.85697.

On the data front, inflation in the eurozone rose to 2% in February as expected, from 1.9% in the previous month. Core inflation was unchanged at 0.9%, services inflation rose to 1.3%, but non-energy industrial goods inflation fell to 0.2%, from 0.5% in January.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics said that he thinks that core inflation will nudge up to 1.1% in the second quarter, helping to push headline inflation to about 1.4%.

“This is well below the European Central Bank’s target, and the central bank will reiterate its vigilance against downside risks next week. But a confrontation is looming between very aggressive monetary policy and an economy with stable GDP growth, falling unemployment and normalising inflation.”

Meanwhile, unemployment in the monetary group of 19 countries was unchanged as expected at 9.6% in January.

Florian Hense, an economist at Berenberg, said: “The ECB will be very cautious not to make the same mistake it did in 2011 when it ended up hiking rates in April and July, just a few months before the euro crisis erupted. The ECB will have little need to revise its staff projections for growth (1.7% for 2017 and 1.6% for 2018), but may edge up its inflation forecasts (currently 1.3% for 2017 and 1.5% for 2018) due to higher than expected base effects from oil prices change.

“We look for the ECB to drop its dovish guidance (‘risks tilted to the downside’) in mid-2017 and announce in autumn 2017 a gradual reduction of asset purchases starting in January 2018. After the likely end of such purchases in the autumn of 2018, the first ECB hike in the refinancing rate may follow in September 2019, that is shortly before [ECB president Mario] Draghi’s eight-year term ends in late October 2019.”

In corporate news, Capita, booted from the FTSE 100 index on Wednesday, tumbled 7.7% after the outsourcing firm reported a 33% slump in profits to £74.8m as its chief executive Andy Parker announced his resignation following a string of earnings warnings.

Building materials supplier Travis Perkins slumped 7.86% after it said pre-tax profit for the year dropped 67% on the back of exceptional charges.

Anheuser-Busch InBev fell 2.65% after the drinks giant reported its first drop in earnings for over a decade due to lower than expected sales of beer in Brazil.

Swiss pharmaceutical group Roche Holding rose 5.3% after it reported positive clinical trial results for an early-stage breast cancer drug.

LafargeHolcim was up 3.28% after the building materials supplier swung to a profit after cutting costs.