European stocks close higher after UK CPI release and positive US CPI data
Investing.com – European stock markets closed higher Wednesday, as investors digested cooling UK inflation data, with sentiment improved after the release of CPI data showing a 0.4% increase in December.
This increase slightly exceeded November’s 0.3% increase. On an annual basis, CPI climbed 2.9%, up from 2.7% the previous month.
At 11:30 ET (16:30 GMT), the DAX index in Germany climbed 1.7%, the CAC 40 in France gained 0.9% and the FTSE 100 in the UK surged 1.3%.
US inflation data expectations
Investors were tentatively awaiting the release of US consumer price data as it could potentially shift expectations of future monetary policy from the Federal Reserve.
Markets anticipated the next Fed rate cut to occur in June after the unexpectedly strong jobs report earlier this month.
Economists expected the December CPI to show a 2.9% year-over-year increase, an increase of 0.4% on a monthly basis, while the core measure, which excludes volatile food and energy components, was expected to rise 0.3% monthly, a 3.3% annual gain.
While the Fed was confident that inflation had moderated enough to start cutting interest rates in September, the pace of annual inflation has remained above the Fed’s 2% target.
US producer price data for December was surprisingly tame on Tuesday, with the core measure flat in the month.
Back in Europe, British inflation unexpectedly slowed to an annual rate of 2.5% in December from 2.6% in November, while core measures of inflation fell more sharply.
The Bank of England announces its next interest rate decision on Feb. 6, and this cooling of inflation could persuade the policy makers to cut interest rates again, especially after UK government debt yields recently soared to 16-year highs amid worries about Britain’s fiscal health under the leadership of Chancellor Rachel Reeves.
US banks in spotlight
In corporate news, the focus was on US fourth-quarter 2024 earnings, with some of the biggest US banks reported their results. Citigroup (NYSE:C) rose about 7% after delivering stronger-than-expected earnings for the fourth quarter of 2024, with EPS reaching $1.34, surpassing the forecast of $1.22.
Goldman Sachs (NYSE:GS) posted adjusted earnings per share of $11.95 for the same period, significantly beating the analyst consensus of $8.12, sending shares up 5.4%. JPMorgan Chase (NYSE:JPM) shares also gained about 2% after exceeding estimates with EPS of $4.81.
Elsewhere, Swiss-based SGS (SIX:SGSN) stock fell over 6% after it confirmed that it is in preliminary merger talks with Bureau Veritas (EPA:BVI), a French multinational, to create a testing and certification powerhouse valued at over $30 billion.
Hays (LON:HAYS) stock rose 3% despite the British recruiter forecasting first-half operating profit below market expectations, citing weakness across Europe, and said it expects conditions to remain subdued in the near term
Crude gains after drop in US inventories
Oil prices rose Wednesday, helped by a drop in US crude stockpiles as well as concerns that new sanctions on Russian oil exports will disrupt global supplies.
By 11:30 ET, the US crude futures (WTI) climbed over 2% to $77.93 a barrel, while the Brent contract rose 1.6% to $81.24 a barrel.
Prices slipped on Tuesday after the US Energy Information Administration predicted oil would come under pressure over the next two years as supply would outpace demand.
That said, the market has found some support from a drop in crude stockpiles in the US, the world’s biggest oil consumer, reported by the American Petroleum Institute late on Tuesday.
Traders also continue to focus on the Russian oil sanctions, amid uncertainty about how much Russian supply will be lost in the global market and whether alternative measures can offset the shortfall.