Europe midday: Shares rally on EZ industrial production data

The pan-European Stoxx 600 index was up 0.51% at 483.35. Shares fell in the US overnight as inflation rose by more than expected in January, with the headline consumer price index up 0.3% month on month and 3.1% annually, higher than forecasts of 0.2% and 2.9% respectively.

Sentiment was boosted as the eurozone managed to avoid a technical recession in the final three months of last year as the bloc's stagnant GDP data was confirmed.

GDP grew 0% in the final quarter of 2023, in line with the flash reading, statistics office Eurostat said on Wednesday, which also confirmed that output fell 0.1% in the prior three months.

Two quarters of consecutive declines in output are usually counted as a technical recession.

Germany, which is the largest economy in Europe, contracted by 0.3% in the final quarter and France flatlined. Offsetting this was 0.2% growth in Italy, 0.6% in Spain, and a 0.8% reading from Portugal.

Contrasting the anaemic GDP figures, eurozone employment rose by 1.3% year-on-year in the final quarter, above forecasts of 1.1%. Further good news came with a 2.6% jump in industrial production, although this was skewed by a massive 44.5% jump in Ireland.

In the UK inflation was unchanged at 4% year-on-year in January, better than expected given a rise in energy prices, although food and non-alcoholic beverage prices eased.

Investors are also looking ahead to fourth-quarter gross domestic product numbers on Thursday that could show Britain has entered a technical recession.

‘’Inflation is still acting like an awkward teenager, staying stubborn despite attempts to calm it down, although the moodiness isn’t as bad as expected,” said Hargreaves Lansdown analyst Susannah Streeter.

“Disinflationary forces are at work in the economy, which should see further drops in the months to come with the target of 2% within reach this spring.”

“The uplift in services inflation from 6.4% to 6.5% will continue to be a nagging worry though for Bank of England policymakers. They’ve already flagged concerns about pay growth which is slowing but inflation busting pay rises are still the norm.”

However, the data fuelled hopes of interest rate cuts, with economists now expecting one in May. UK housebuilders Taylor Wimpey and Persimmon made gains on the prospect of lower borrowing costs.

In other equity news, ABN Amro shares gained after the Dutch bank beat fourth-quarter profit expectations on the back of high interest and credit impairment releases.

Coca-Cola HBC surged by almost 8% after it posted record profits last year driven by surging sales and volumes for sparkling drinks and coffee combined with costs easing in the second half.

Thyssenkrupp plunged as the German company cut its annual sales and net profit forecasts due to softening demand and prices at its steel division.

Reporting by Frank Prenesti for Sharecast.com