(Sharecast News) – European shares rallied at midday on Wednesday as investors shrugged off a flatlining of UK core inflation.
The pan-European Stoxx 600 was down 0.18% in early deals with all major regional bourses lower. Shares in the US and Asia also closed sharply lower overnight.
UK consumer price inflation slowed to 6.8% in July, according to official figures. However, core inflation, which strips out volatile food and energy prices, remained unchanged at 6.9% and higher than economist expectations for a reading of 6.8%.
The pound rose marginally against the dollar, 0.26% at $1.2733 and was little changed against the euro, with the single currency last buying 85.78p.
‘Inflation appears finally to have taken a big step downwards, which will come as a big sigh of relief amid cost-of-living pain, but underlying prices are staying uncomfortably stubborn,” said Hargreaves Lansdown analyst Susannah Streeter.
“The pound has edged higher against the dollar with the big bets on the Bank of England pushing up interest rates again in September by another 25 basis points to 5.5%, and the high cost of borrowing set to linger.”
In equity news, UK insurance shares were in demand. Admiral was up after reporting a small rise in half-yearly earnings as it hiked prices in response to claims inflation, but also slashed its interim dividend by 15%. Rival Aviva made strong gains after better interim earnings and a dividend hike, while Direct Line rose in sympathy.
Reporting by Frank Prenesti for Sharecast.com