European Stocks Close Notably Lower On Hotter-than-expected U.S. Inflation Data

(RTTNews) - European stocks closed notably lower on Tuesday as hotter-than-expected U.S. consumer price inflation dashed hopes of an interest rate cut by the Federal Reserve. Investors also digested the latest batch of regional economic data and corporate earnings updates.

The Labor Department said its consumer price index rose by 0.3% in January after inching up by 0.2% in December. Economists had expected consumer prices to edge up by 0.2%.

While the report also showed the annual rate of consumer price growth slowed to 3.1% in January from 3.4% in December, economists had expected the pace of growth to slow to 2.9%.

With Federal Reserve officials repeatedly saying they need more "confidence" inflation is slowing before lowering interest rates, the data has further reduced optimism about a near-term rate cut.

The pan European Stoxx 600 tumbled 0.95%. The U.K.'s FTSE 100 dropped 0.81%, Germany's DAX ended 0.92% down, and France's CAC 40 closed lower by 0.84%. Switzerland's SMI settled 0.33% down.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Norway, Poland, Portugal, Spain, Sweden and Turkiye closed with sharp to moderate losses. Russia edged up marginally.

In the UK market, Barratt Developments, Taylor Wimpey, Fresnillo, Endeavour Mining, Berkeley Holdings, Entain, Scottish Mortgage, ICP, Airtel Africa, Ocado Group, Ashtead, RS Group and Segro ended lower by 3 to 5%.

Marks & Spencer, Next, Schrodders, Kingfisher, Land Securities, Prudential, M&G, Legal & General, Howeden Joinery, Barclays Group and Tesco lost 2 to 3%.

AstraZeneca gained about 1%. GSK, Centrica and HSBC Holdings posted modest gains.

In the German market, Infineon tumbled 5%. SAP, Vonovia and Puma ended lower by 2.7 to 3.1%. Siemens Energy, Zalando, Adidas, Qiagen, Sartorius, Brenntag, Bayer, Commerzbank, BMW and Fresenius lost 1 to 3.2%.

Fresenius Medical Care climbed more than 2%. Hannover Rueck, Munich RE, Continental and BASF gained 0.6 to 1.2%.

In Paris, ArcelorMittal and Unibail Rodamco both ended lower by more than 4%. Teleperformance, STMicroElectronics, Alstom, Hermes International, LVMH and Legrand declined 2.5 to 3.4%.

Michelin surged more than 6%. Veolia, Orange, TotalEnergies and Pernod Ricard posted moderate gains.

In European economic news, France's unemployment rate held steady in the fourth quarter after rising in the previous two quarters, the statistical office INSEE reported. The ILO unemployment rate stood at 7.5% in the fourth quarter, the same as in the previous quarter, which was revised up slightly from 7.4%.

The UK jobless rate declined in the fourth quarter, figures from the Office for National Statistics showed. The ILO unemployment rate fell to 3.8% in the fourth quarter from 3.9% in the prior period. The rate was also below economists' forecast of 4%.

Survey data from ZEW revealed that German economic sentiment strengthened more than expected to its highest level in a year in February as market experts foresee interest rate reductions in the coming six months as inflation slows.

The ZEW Indicator of Economic Sentiment rose more sharply to 19.9 in February from 15.2 in January. This was the highest score since February 2023, when the reading was 28.1. The score also remained well above economists' forecast of 17.5.

"The German economy is in a bad place," ZEW President Achim Wambach said.

A report from the Federal Statistical Office showed Switzerland's consumer price inflation eased unexpectedly in January to the lowest level in more than two years, climbing 1.3% year-over-year, slower than the 1.7% gain in December. Economists had expected inflation to remain stable at 1.7%.