Gains in European Stocks Fade Into the Close as US Data Weighs

European stocks ended the day barely higher as US consumer inflation data bolstered speculation on another Federal Reserve rate hike.

(Bloomberg) — European stocks ended the day barely higher as US consumer inflation data bolstered speculation on another Federal Reserve rate hike.

The Stoxx 600 Index was up 0.1% by the close in London, paring earlier gains of as much as 0.9%. The pullback followed US CPI data that showed consumer prices advanced at a brisk pace for a second month, reinforcing the Fed’s intent to keep interest rates high and bring down inflation. 

“This should reduce volatility on interest rates over the coming days,” said Alexandre Hezez, chief investment officer at Group Richelieu, a Paris-based asset manager. He added that the core inflation data leaves room for a pause for the Fed, while the US employment data will now be a closely watched metric.

Energy stocks outperformed strongly in Europe, driven by oil prices, while travel & leisure and consumer products sectors were trading in the red. And as treasury yields climbed, renewable energy stocks dipped, lead by Orsted AS. 

After two straight months of losses, the pan-European index is up 0.8% in October and trading just below its 200-day moving average. 

Among individual stocks, Publicis shares rallied to the highest level since March after the advertising agency upgraded its full-year organic growth target on the back of stronger-than-expected 3Q sales growth. Barclays shares lost ground after its chief executive officer said stagnant deal activity, easing volatility and peaking interest rates would likely weigh on bank earnings. 

Luxury stocks were yet again under pressure after Wednesday’s slump on disappointing LVMH sales. LVMH results has turned the focus to earnings season with a series of profits warnings triggering steep declines, including France’s EuroAPI and Alstom.

“Looking forward, there’s a cautious wait for the earnings season which will likely be the main driver for equity markets,” said Jeanne Asseraf-Bitton, head of research and strategy at BFT IM in Paris. “Results will be heavily scrutinized and heavily sanctioned if they disappoint,” she warned 

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–With assistance from Michael Msika and Allegra Catelli.

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