European shares rose extended gains on Wednesday on the back strong corporate updates and less hawkish-than-expected comments from US Federal Reserve Chair Jerome Powell’s in his Congressional hearing testimony on Tuesday.
The pan-European STOXX 600 index was up 0.55% as Powell said the US economy was ready for the start of tighter monetary policy but it may take several months to make a decision on winding down the central bank’s balance sheet.
Investors were now eyeing US inflation figures later today, which is expected to come in higher again on soaring demand, supply chain constraints and labour shortages.
“With a March rate hike now almost a done deal, today’s US CPI is likely to be a key signpost in the wider discussion, on how many more hikes are coming down the pipe, as central banks wrestle with a dilemma of rising price pressures, the risks of an economic slowdown caused by tighter restrictions, and a decline in consumer confidence,” said CMC Markets analyst Michael Hewson.
“In November US CPI hit a 39 year high of 6.8%, a trend which looks set to continue with today’s December number, given that PPI is already close to 10%.
“PPI, which is due tomorrow, has tended to be a leading indicator for CPI over the last 12 months, and while we did see a pause in headline CPI through the summer months, stabilising at 5.4%, we’ve seen a sharp acceleration since October.
In other European economic news, German wholesale price inflation slipped back to 16.1% in December, a 10-month low after hitting a record high 16.6% in November.
In equity news, Dutch firm Philips plunged almost 14% after saying it expects fourth-quarter core profit to drop around 40%, hit by a global shortage of parts and a recall of ventilators.
Teamviewer shares soared 14% to the top of the Stoxx after the company reported a 20% rise in fourth-quarter billings.
French cloud computing company OVHcloud climbed after a 13.9% rise in first-quarter revenue and said it was on track to achieve its full-year objectives.
Grafton gained as the UK and Irish building materials distributor and DIY retailer upgraded its full-year operating profit expectations after a positive end to the year.
On the downside, JD Sports fell even as it lifted annual profits guidance after revenues rose 10% in the 22 weeks to January 1 and US fiscal stimulus boosted trading.
