EUROPE MARKETS: European Stocks Swing After U.S. Inflation Heats Up
February 14 2018 - 10:19AM
Dow Jones News
By Carla Mozee, MarketWatch
Headline U.S. consumer inflation records biggest increase in 5
months, though other measures subdued
European stocks were whipped around Wednesday after the rate of
monthly U.S. inflation exceeded expectations, underscoring concerns
that rising consumer prices will lead to higher borrowing
costs.
How markets are moving
The Stoxx Europe 600 index was up 0.4% at 372.16, but had
flipped lower in the wake of U.S. figures on January inflation and
retail sales. The European index had been up as much as 0.9%
intraday. On Tuesday, the index lost 0.6%
(http://www.marketwatch.com/story/european-stocks-run-into-the-red-as-wall-street-sets-course-for-pullback-2018-02-13).
Also digging out of the red post-data, Germany's DAX 30 index
was up 0.3% to 12,236.53, and France's CAC 40 index gained 0.4% to
5,130.31.
Spain's IBEX 35 picked up 0.2% to 9,666.90. The U.K.'s FTSE 100
was up 0.5% at 7,205.77.
The euro bought $1.2323, down from $1.2354 late Tuesday in New
York.
In the fixed-income market, the yield on the 10-year German bund
reversed course and rose 2 basis points to 0.755%.
What's driving the market
European stocks briefly swung lower and U.S. stocks opened in
the red after the U.S. consumer-price index leapt 0.5% in January
(http://www.marketwatch.com/story/cpi-surges-05-in-january-but-yearly-rate-of-inflation-unchanged-2018-02-14),
the biggest increase in five months. Economists surveyed by
MarketWatch had forecast a 0.4% increase. The CPI over the past 12
months was unchanged at 2.1%, but was above the 1.9% consensus
estimate.
European stocks were higher ahead of the inflation report. The
recent spike in volatility and violent selloffs in global markets
have emanated in part from worries that higher inflation will lead
the Federal Reserve to hike up interest rates at a
faster-than-expected pace.
Also Wednesday, U.S. retail sales dropped 0.3% in January
(http://www.marketwatch.com/story/us-retail-sales-slump-in-january---and-december-doesnt-look-so-good-now-either-2018-02-14),
the biggest drop in nearly a year.
European stocks early Wednesday also got a boost after data
showing Germany's gross domestic product expanded by 0.6% in the
fourth quarter
(http://www.marketwatch.com/story/german-gdp-eases-to-25-in-q4-as-exports-pick-up-2018-02-14)
and by 2.9% a year earlier. The growth was aided by demand for
German exports, although the figures indicated slight easing from
0.7% in the fourth quarter.
What strategists are saying
"Given the data it seems unlikely the Fed will shy away from a
rate hike in March. It would, in fact, seem all but guaranteed
following the appointment of Jerome Powell earlier this month as
Fed chair," said Jacob Deppe, head of trading at Infinox, in a
note.
"The fear is the Fed hikes too far, too fast, U.S. monetary
policy will have to walk a tightrope in order not to kill off
growth, while steering a path towards normal economic conditions.
Mr. Powell has an unenviable task ahead of him," said Deppe.
Stock movers
Credit Suisse Group AG (CSGN.EB) (CSGN.EB) gained 2.5% after the
bank posted a narrower-than-expected loss of 2.13 billion Swiss
francs
(http://www.marketwatch.com/story/credit-suisse-loses-1-bln-in-2017-on-us-tax-hit-2018-02-14)in
the fourth quarter. The lender did post its third straight
full-year net loss.
Sky PLC shares (SKY.LN) leapt 2.3% after the broadcaster
extended its rights to show Premier League soccer matches through
2022
(http://www.marketwatch.com/story/sky-extends-premier-league-rights-to-2022-2018-02-14),
at a cost of 1.19 billion pounds ($1.65 billion) a year.
Economic data
The second reading of eurozone GDP in the fourth quarter came in
at 0.6% from Eurostat, meeting expectations. Separately, eurozone
industrial production increases at a 0.4% rate in December, above
the 0.2% FactSet estimate.
(END) Dow Jones Newswires
February 14, 2018 10:04 ET (15:04 GMT)
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