European stocks saw gains on Wednesday, buoyed by promising economic data from the UK and US, particularly concerning consumer price inflation.
The slower-than-expected increase in US consumer price inflation has sparked optimism for potential interest rate cuts by the Federal Reserve. According to the UK’s Office for National Statistics, consumer price inflation unexpectedly eased in December.
US data from the Labor Department indicated that while consumer prices rose slightly more than anticipated in December, the annual core consumer price growth rate actually slowed. The consumer price index increased by 0.4% in December, following a 0.3% rise in November, contrary to economists’ projections for a 0.3% increase.
Additionally, the annual growth rate of consumer prices in the US climbed to 2.9% in December from 2.7% in November, aligning with market expectations.
Pan-European markets reflected these developments, with the Stoxx 600 up by 1.33%. The UK’s FTSE 100 gained 1.21%, Germany’s DAX advanced 1.5%, France’s CAC 40 rose by 0.69%, and Switzerland’s SMI increased by 0.68%. European markets including Belgium, Denmark, Finland, Greece, Ireland, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and Turkey all closed with varying levels of gains, while Iceland and Russia saw downturns.
In the UK market, notable performers included Lloyds Banking Group and Barclays Group, each closing up 6.5%. NatWest Group was up 5%, and Standard Chartered rose by 3.3%. St. James’s Place achieved a 6.21% increase, while Howden Joinery, Diploma, Severn Trent, Taylor Wimpey, Land Securities, United Utilities, Whitbread, Barratt Redrow, Persimmon, Unite Group, Convatec Group, and British Land saw gains between 4% and 5.3%.
Wind turbine manufacturer Nordex experienced a significant boost after reporting a substantial rise in order intake, reaching 8.34GW from 7.36GW in the previous year.
Conversely, Endeavour Mining fell by 1.7%, and shares of Anglo American Plc, Reckitt Benckiser, Imperial Brands, Melrose Industries, and Rolls-Royce Holdings slightly decreased by 0.5% to 1%.
Germany’s market saw Bayer climb nearly 6%, while Vonovia, Brenntag, Deutsche Post, BASF, Zalando, Continental, Siemens Energy, and Deutsche Bank all gained between 3% and 5%. SAP, Porsche, Infineon, HeidelbergCement, Fresenius Medical Care, Allianz, RWE, Munich RE, Adidas, BMW, Volkswagen, Mercedes-Benz, E.ON, and Fresenius also posted significant gains.
In France, companies like Sanofi, Michelin, Unibail Rodamco, Societe Generale, Edenred, ArcelorMittal, STMicroElectronics, Vivendi, Saint-Gobain, Bouygues, Renault, BNP Paribas, and AXA saw increases ranging from 2% to 3.1%. However, LVMH declined by 1.6%, with Pernod Ricard, Airbus Group, and Dassault Systemes closing moderately lower.
UK’s consumer price inflation, per ONS data, unexpectedly moderated in December to an annual increase of 2.5%, down from November’s 2.6%, confounding expectations for a stable 2.6% rate. Month-on-month, the CPI increased by 0.3% following a 0.1% rise in November, against forecasts of a 0.4% increase.
Further ONS data revealed a fifth consecutive monthly decline in input prices for December, showing a 1.5% annual drop following a 2.1% decrease. Monthly input prices saw a slight rise of 0.1%, compared to no growth in November, while output prices rose by 0.1% after a 0.4% increase the previous month.
Germany's wholesale prices rose for the first time in twenty months, increasing 0.1% year-on-year in December, reversing the 0.6% decline in November.
Eurostat reported a second consecutive monthly increase in eurozone industrial production, which grew by 0.2% in November, matching October’s pace but slightly below the predicted 0.3% growth. Year-on-year, the decline in industrial output deepened to 1.9% from 1.1% in October.
France’s statistical office INSEE announced that consumer price inflation remained steady at 1.3% in December, consistent with November and preliminary estimates. Harmonized inflation edged up to 1.8% from 1.7% the previous month, though still short of the European Central Bank’s 2% target. Monthly consumer prices rose by 0.2%, reversing the 0.1% decline in November and matching the flash estimate. Similarly, the harmonized index of consumer prices climbed 0.2% after a 0.1% decrease the previous month.
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