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European stock indices at two-month high as inflation eases

written by Bella Palmer

The Stoxx 600 index ended the session 0.4 per cent up at 454.47 with broad-based gains across the continent

European stock indices put in decent gains on Wednesday, ending at a two-month high as investors shrugged off weaker-than-expected domestic data to focus on cooling inflation in the US and UK.

The Stoxx 600 index ended the session 0.4 per cent up at 454.47 with broad-based gains across the continent. The pan-European index has not ended above this level since 21 September.

Data released so far this week has showed that consumer price inflation slowed more than forecast in both the US and UK, while the US wholesale prices dropped by their biggest amount in more than three years. The figures have added to hopes that both the Fed and BoE will now refrain from tightening monetary policy any further, with inflationary pressures finally beginning to ease.

Investors continue to rejoice in the hope of no more Fed rate hikes, with UK traders cheered by this morning’s CPI decline too, said Chris Beauchamp, analyst at IG. Overall the skies have cleared dramatically for markets, and hopes of a soft landing and improved earnings have led flows back into stocks.

Industrial output in the eurozone reduced more than expected in September, according to figures from Eurostat on Wednesday. Production dropped by 1.1 per cent across the EU, dropping after a 0.6 per cent rise in August. The market consensus was for a smaller decline of 0.7 per cent.

With surveys pointing to weak orders amid destocking and little signs of consumers coming to the rescue, we think that eurozone gross domestic product will stagnate or even contract again over the fourth quarter, said Mateusz Urban, senior economist at Oxford Economics.

The data came as the Eurozone Commission cut its GDP forecasts for the eurozone for 2023 and 2024, saying that growth had lost momentum on the back of the high cost of living, weak external demand and higher interest rates. The Commission now expects GDP growth of 0.6 per cent for this year and 1.2 per cent in 2024 – 0.2 percentage points below the summer forecast.


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