Europe open: Stocks edge higher as investors eye inflation data
European stocks edged higher in early trade as investors eyed the latest Eurozone inflation data and looked ahead to Thursday’s eagerly-awaited rate announcement from the European Central Bank.
At 0900 GMT, the benchmark Stoxx Europe 600 index was up 0.5%, Germany’s DAX was up 0.1% and France’s CAC 40 was 0.2% higher.
“Despite stagnant global manufacturing, decimated commodity prices, low inflation and expectations for an imminent rate hike by the Fed, equities continue to push higher,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.
“This could be attributed to seasonality as we are now in the peak annual bull market months, but it may also, rather ironically, be because the market is relatively unloved. Rallies typically come to an end when everyone is fully invested and there is then limited scope for further purchases, but the current market still has many investors sitting in cash on the sidelines, which suggests that there is plenty of scope for prices to rise further.”
Ahead of the Federal Open Market Committee’s meeting on 15 and 16 December, investors will be turning their attention to more comments from Fed chairwoman Janet Yellen and vice chairman Stanley Fischer, who are due to speak publicly over the next couple of days.
The potential for a Fed rate hike is in direct opposition to other global central banks, with the ECB under pressure to implement further stimulus to boost inflation.
Many market participants are expecting the ECB to announce a cut to the deposit rate and an increase in the size and scope of its bond-buying programme.
However, not everyone is convinced.
“German unemployment at a record low of 6.3%, European manufacturing PMIs at eighteen month highs, and if we get a further uptick in the latest EU inflation numbers this morning, expectations of a big bang extension to the ECB’s easing program tomorrow could well go the way of the fairies,” said Michael Hewson, chief market analyst at CMC Markets.
In corporate news, pharmaceutical stocks gained, with Roche and GlaxoSmithKline both in the black after upgrades by Citigroup and Morgan Stanley.
In London, software company Sage slumped after its full year revenue missed analysts’ expectations.
Shares in beleaguered German car maker Volkswagen skidded after Standard & Poor’s cut its credit rating on the company for the second time in two months.
Still to come, Eurozone inflation figures for November are due at 1000 GMT. In the US, the ADP employment report is at 1315 GMT while non-farm productivity is at 1330 GMT.