European Shares Steady Ahead of Key Regional Inflation Data

By Pranav Kashyap

European stocks remained mostly steady on Tuesday as investors awaited important inflation data for the region. The pan-European index rose 0.1% to 523.42 after experiencing its worst performance in over a week on Monday. While technology shares increased by 1%, this was balanced out by a nearly 1% decline in luxury goods companies.

Last week, European luxury firms saw significant gains, driving the STOXX 600 to new highs, largely due to stimulus measures from China. "It’s normal to see a pause in a bullish trend, considering the strength of last week’s gains," noted Fiona Cincotta, senior market analyst at City Index.

Energy stocks slipped by 0.9%, largely influenced by a 5.8% drop in biofuels manufacturer Neste Oyj. Investors are now focused on the Eurozone’s flash inflation figures for September, which are scheduled for release at 0900 GMT. These figures could influence whether the European Central Bank (ECB) decides to lower interest rates during its upcoming meeting in two weeks.

ECB President Christine Lagarde stated on Monday that the central bank is growing more confident that inflation will taper to its 2% target. Additionally, market participants will be paying close attention to speeches from ECB Vice President Luis de Guindos, policymaker Olli Rehn, and board member Isabel Schnabel, all set to speak at various events throughout the day for insights on potential rate cuts.

On the manufacturing front, the Eurozone experienced its fastest decline in manufacturing activity this year during September, while Germany’s manufacturing sector contracted at its most rapid rate in a year, according to PMI data. France’s manufacturing sector also continued to shrink, with Italy’s manufacturing activity declining for the sixth consecutive month.

Notable stock movements included Covestro, which soared 3.8% after the Abu Dhabi National Oil Company announced an agreement to acquire the German chemicals producer for 14.7 billion euros. Anheuser-Busch InBev saw a 2.3% increase following an upgrade from Citigroup, which moved the brewer’s stock rating from "neutral" to "buy."

Meanwhile, in the U.S., Federal Reserve Chair Jerome Powell indicated that the central bank is likely to maintain its current approach of 25 basis-point rate cuts after new data reinforced confidence in economic growth and consumer spending. Cincotta remarked, "The market’s hopes for another significant rate cut were exaggerated, and we are witnessing a pullback in that optimism."