European stocks climb as inflation takes centre stage ~ EconomyLens.com

London (AFP) – European stock markets rose Wednesday as traders focused on inflation data in Britain and the United States. London led the way in Europe as official figures showed an unexpected dip to UK annual inflation, easing some pressure on the Labour government as it struggles with growing the economy. The pound steadied versus the dollar and euro, with analysts forecasting that the Bank of England would likely cut its key interest rate next month as the rate of price increases cools.

Separate official data showed Europe’s biggest economy, Germany, contracted for a second straight year in 2024, with little hope of a strong recovery ahead of national elections next month. Market watchers are now awaiting the release of US consumer-price inflation data later in the day. A below-forecast read on US wholesale prices provided a little relief and helped the Dow and S&P 500 end higher Tuesday, though sentiment remains clouded by expectations that the Federal Reserve will not cut interest rates as much as hoped this year.

After Wall Street’s broadly positive lead, Asian markets fluctuated Wednesday. “The S&P 500 is expected to trade flat at the open as investors wait on tenterhooks for the latest US inflation snapshot,” noted Susannah Streeter, head of money and markets at Hargreaves Lansdown. “If there’s a jump in the core rate of inflation in the US it could quash hopes of an interest-rate cut this year and could lead to fresh market jitters,” she added.

In Asia, Tokyo’s stock market ended down, though games giant Nintendo piled on more than two percent and briefly hit a record high as traders anticipate it will soon release its much-anticipated Switch 2 console. The Nikkei 225’s drop also came as the yen strengthened, with traders weighing the chances of a rate hike by the Bank of Japan this month.

Also in focus this week is the release of Chinese 2024 growth data, with expectations that it could come in below the previous year and be among the slowest in more than three decades. Leaders have unveiled a string of measures to reignite the economy, with a particular emphasis on consumers and the troubled property sector, though there are fears the return of President-elect Donald Trump could see another painful China-US trade war. Trump has warned he will impose tariffs of as much as 60 percent on imports from China, and observers say Beijing has likely kept its powder dry with regards to stimulus as it prepares for the next four years.