Europe open: Markets subdued as interest-rate uncertainty prompts caution

Stock markets across Europe opened flat on Thursday with investors exercising caution after an upside surprise in US inflation data rattled markets the previous day.

Global stock markets suffered a steep sell-off on Wednesday – though European indices had recovered somewhat by the close of play – after a stronger-than-expected acceleration in US inflation dashed any hopes that the Federal Reserve is close to cutting interest rates.

Stephen Innes, managing partner at SPI Asset Management, said the Fed would be looking for "tangible signs of economic deceleration" before even entertaining a rate cut before the fourth quarter, and said that this "uncertain policy period will negatively affect risk sentiment in the short term".

As such, the Stoxx 600 index was up just 0.02% at 506.67 by 0927 CEST, with indices across the continent rangebound, either showing losses of 0.1% to gains of 0.3%.

"At one stage the consensus was that the Fed would be the first to cut interest rates ahead of the ECB and the Bank of England. It is now increasingly possible that it could be the last, with cuts from both the ECB (although not at today’s meeting) and the Bank of England expected before September, when the Fed is now expected to move," said Richard Hunter, head of markets at Interactive Investor.

"There is also an emerging, albeit minority, view that there may be no rate cuts at all this year given the strength of the underlying economic data."

Back in Europe, with no major economic data due for release, eyes were firmly fixed on the European Central Bank meeting, which concludes at 1415 CEST, though no change in policy is expected.

Market movers

French advertising and PR titan Publicis edged higher after reporting a 5.3% increase in revenues in its first quarter, ahead of expectations, on the back of new business wins.

Swiss fragrance group Givaudan also impressed with a 13% jump in first-quarter like-for-like sales, ahead of the 6.9% growth expected by consensus.

UK-listed biopharma giant AstraZeneca announced that it will increase its annual dividend by 7%, which the board said demonstrates its confidence in the company's performance and cash generation.