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Europe Close: Stocks Rise on Inflation Stats, but BP Provides a Drag in London

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European stocks managed to hold on to gains on Tuesday despite a flat start on Wall Street and losses in London, with investors reacting positively to economic growth and inflation figures from the Eurozone.

The pan-European Stoxx 600 closed the session up 0.6% at 434, rising for the second straight day after closing at a 10-month low of 429.58 on Friday.

Gains of 0.6% were registered in Frankfurt, while stocks in Paris rose 0.9% and jumped 1.5% in Milan.

However, London’s FTSE 100 fell 0.2%, dragged into the red by weaker-than-expected results from oil heavyweight BP, while Spanish banks kept Madrid’s Ibex 35 flat after results from BBVA.

Meanwhile, US stock markets were searching for direction as the two-day Federal Open Market Committee meeting kicked off in Washington – though the Fed is widely expected to keep rates on hold.

Chris Beauchamp, analyst at IG, said today’s trading session as been “dominated by month-end flows”. He said: “Sentiment remains fragile at the end of a tough October for risk assets, and the rally has a fragile feel to it given the potential for the Fed to throw a spanner in the works tomorrow.”

After a slow start, European stocks pressed ahead after Eurostat figures showed that Eurozone inflation slowed more than forecast in October, raising hopes that the European Central Bank (ECB) may cut interest rates sooner than expected next year.

The annual rate of consumer price inflation slowed to a two-year low of 2.9%, down from 4.3% in September and well below the 3.1% consensus forecast, on the back of continued energy price deflation and easing food price inflation. Excluding volatile items like food and energy, core inflation slowed to an annual rate of 4.2%, from 4.5% – more or less as expected.

Analysts at Oxford Economics said the drop in core inflation marries with “growing weakness” in demand across the Eurozone, evidenced by Tuesday’s GDP figures which showed that the bloc contracted by 0.1% during the third quarter.

“All of this tallies with our assessment of an earlier-than-expected ECB policy pivot. We think the ECB will start with rate cuts already in early Q2 2024. Despite that, we expect headline inflation to dip below target next year.”

BBVA drags Spanish banks lower

Spanish banking giant BBVA was out of favour despite beating forecasts with a 13% rise in third-quarter net profits to €2.1bn, as it booked a 29% increase in provisions and reported a loss in Turkey.

Sector peers Banco Santander, Banco de Sabadell and CaixaBank also fell on negative readacross.

In contrast, Italian banks were providing a big lift to the FTSE MIB, which was outperforming other indices, with Bper Banca, Banca Monte Paschi Siena, Banco Bpm and Intesa Sanpaolo all rising strongly.

Belgian drinks giant AB InBev saw shares jump after reporting a 5% increase in revenue in the third quarter to $15.1bn and a 4.1% rise in EBITDA. The company reiterated its guidance for 4-8% EBITDA growth in the medium term.

In London, BP was down after the oil titan missed profit forecasts for the third quarter. The company reported an underlying replacement cost profit of $3.3bn, an improvement from the $2.6bn recorded in the second quarter but below the $4bn expected by analysts. Shell also fell.

Source : Sharecast

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