Yahoo Finance European stock markets rise as eurozone inflation hits 5.1%
European stock markets pushed higher on Wednesday, building on a run of gains seen earlier this week, despite eurozone inflation hitting a record high of 5.1%.
In London, the FTSE 100 (^FTSE) closed 0.8% higher, hitting two-week highs as worries about a potential conflict in Eastern Europe diminish, while the CAC (^FCHI) gained almost 0.4% in Paris, and the Frankfurt DAX (^GDAXI) was treading water.
It came as the consumer prices index rose at an annual rate of 5.1% in January, compared with 5% in December, according to Eurostat, the European Union’s statistics office.
This stands at more than twice the European Central Bank’s (ECB's) target, but the bank has so far shrugged off rising inflation, saying that it is temporary. Economists had expected a slowdown to 4.4%.
“This comes as unemployment reaches a record low in the eurozone and the prospects for economic growth in 2022 look good," Sandra Holdsworth, head of rates UK at Aegon Asset Management, said. "The European Central Bank meets tomorrow to discuss monetary policy, not much is expected, but data like this must raise the chances of a hawkish shift in tone.”
Elsewhere, UK price annual inflation almost doubled in January to hit its highest rate in nine years.
Figures from the British Retail Consortium (BRC) revealed an acceleration to 1.5% last month, the highest rate since December 2012, and up from 0.8% in the previous month. The rise was led by food prices, which were up 2.7%.
Markets will also be closely watching inflation data for the eurozone for January. Economists are forecasting a drop to 4.4% from 5% in the annual rate.
“While it will be convenient for the European Central Bank to paint this as evidence of their argument that inflationary pressure is transitory and now falling, we already know from the experience of the US it is nothing of the sort,” Michael Hewson, chief market analyst at CMC Markets UK, said.
“There is also the added complication that factory gate price in inflation is even higher, and well above 20% in Germany, Italy and Spain. With markets already pricing in the prospect of two ECB rate rises this year, tomorrow’s ECB press conference will be an exercise in trying to spin a narrative that the market simply doesn’t buy.”
Watch: What is inflation and why is it important?
Across the pond, the S&P 500 (^GSPC) rose 0.1% and the tech-heavy Nasdaq (^IXIC) fell 0.3%. The Dow Jones (^DJI) edged 0.1% lower at the time of the European close.
It came as US firms cut 301,000 jobs last month, an unexpected drop as the Omicron variant hit the labour market.
Economists had expected American companies to take on 200,000 people. This compares with a downwardly revised 776,000 gain in jobs in December.
The leisure and hospitality industry was the hardest hit, losing 154,000 jobs. Trade, transportation and utilities cut 62,000 roles while the other services category declined by 23,000.
The goods-production sector, including natural resources and mining, construction and manufacturing, cut 27,000 jobs.
Read more: Budget airlines carry fewer passengers in January
Asian markets mainly extended their rally overnight as investors became less worried about the Federal Reserve's plans to tighten monetary policy.
In Japan, the Nikkei (^N225) climbed 1.7% while the Hang Seng (^HSI) rose 1.1% in Hong Kong and the Shanghai Composite (000001.SS) dipped 1%.
Elsewhere, oil prices (BZ=F) edged slightly lower, away from their seven-year highs reached last week.
US crude stocks fell by 1.6 million barrels in the week to 28 January, more than expected, Reuters reported, citing market sources who had seen American Petroleum Institute figures.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies including Russia said it would maintain its rate of adding 400,000 barrels a day next month – in line with its previous targets.
