Europe open: German GDP gives shares a boost

European shares opened higher on Wednesday on the back of stronger-than-expected German economic growth, although gains were tempered by inflationary fears.

The pan-European Stoxx 600 index was up 0.19%, with Germany’s DAX outperforming and up 0.4%.

Strong exports and solid construction activity helped the German economy to grow by 0.3% in the final quarter of last year, the Federal Statistics Office said as it revised up an earlier estimate.

London’s FTSE 100 underperformed and was down 0.39% as as sterling rallied. A stronger pound tends to dent the top-flight index as around 70% of its constituents derive most of their earnings from overseas.

Spreadex analyst Connor Campbell said: "While it failed to react much to the announcement at the start of the week, the idea that the UK could be back to ‘normal’ by the summer seems to have finally sunk in for sterling.

"All this spelled disaster for the FTSE. With its many multinational constituents uncomfortably eyeing the pound’s blockbuster performance, the index tumbled half a percent to fall the wrong side of 6,600."

In equity news, Lloyds rose as it reported a 72% slump in annual profits, reflecting the impact of the Covid-19 pandemic, but reinstated dividend payments.

AstraZeneca fell 1.3% after it told the European Union that it expects to deliver less than half the COVID-19 vaccines it was contracted to supply in the second quarter, an EU official told Reuters.

German sportswear company Puma dropped nearly 2.25% after the company said it expected a heavy impact on its results from Covid-19 pandemic lockdowns to the end of the second quarter.