Published by Jessica Weisman-Pitts
Posted on October 31, 2022
By Shreyashi Sanyal
(Reuters) -European shares traded in a narrow range on Monday as euro zone inflation hitting a record high raised fears of hefty rate increases ahead of a slew of major central bank meetings.
Eurostat data showed inflation in the 19 countries sharing the single currency accelerated to 10.7% in October from 9.9% a month earlier, beating expectations in a Reuters poll for 10.2% and way higher than the European Central Bank’s 2% inflation target.
The STOXX 600 index was flat after falling as much as 0.2% earlier in the session.
“With inflation having jumped to well over 10%, the ECB will prioritise price stability and press on with rate hikes regardless,” said Andrew Kenningham, chief Europe economist at Capital Economics.
“We expect headline inflation to fall next year, but with the labour market still tight the core rate looks set to stay well above the ECB’s 2% inflation target.”
This comes after a sharp rise seen in last week’s inflation numbers from Germany, which also reinforced views that the euro zone economy is on the cusp of a recession.
The ECB doubled its deposit rate to 1.5% last week and promised more tightening in the months to come even if it pushes the bloc into recession.
The STOXX 600 was still headed for its first monthly gain in three, rising 5.7% so far in October on the back of a better-than-expected reporting season and hopes that the U.S. Federal Reserve would slow its pace of interest rate hikes.
The Fed is widely expected to raise its benchmark lending rate by 75 basis points this week, but markets remain hopeful that the central bank will deliver a smaller 50-bp increase in December.
Investors will also look towards a Bank of England policy meeting later in the week, with bets running high of it not budging from its similarly hawkish stance.
Travel and leisure stocks rose 1%, leading gains among European sectors, after International Consolidated jumped 5% as a Times report stated that it will renew its EU consolidation plans.
Credit Suisse rose 4.4% as it unveiled details of its plan to raise 4 billion francs ($4.01 billion) from investors.
Fresenius Medical Care (FMC) jumped 5.6% after the German dialysis provider on Sunday reported third-quarter earnings above market expectations.
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Dhanya Ann Thoppil, Subhranshu Sahu and Shailesh Kuber)
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