EUROPE MARKETS: European Stocks Edge Higher In Countdown To U.S. Inflation Data

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03/13/2018 | 12:21 pm

By Carla Mozee, MarketWatch

Corporate financial updates help buoy market; U.K. Spring Statement also in focus

European stocks held to small gains Tuesday, kept aloft by well-received financial updates from utility E.ON and others.

Traders were looking ahead to the release of data on U.S. consumer prices and the U.K.'s Spring Statement on public finances.

Inflation data has been a big driver of action across global equity markets this year, as investors assess what any rise means for the U.S. Federal Reserve's path for interest rate hikes.

How markets are moving

The Stoxx Europe 600 index rose 0.1% to 379.40. The oil and gas group and utility sectors rose, but the telecom and tech groups were lower. On Monday, the pan-European index added 0.3% as a complex deal between German utilities lifted that sector.

But pressure on the European benchmark came from U.K. blue chips, as the FTSE 100 indexedged down 0.1% to 7,209.77. Also, Germany's DAX 30 index pared its gain to 5 points at 12,423.79.

France's CAC 40 index was up 0.4% to 5,297.08 and Spain's IBEX 35 put in the strongest performance, rising 0.7% to 9,795.30.

The euro bought $1.2333, little changed from $1.2337 late Monday in New York.

What is driving the market

Investors are focused on the report on U.S. consumer price inflation in February, after global equity markets sold off last month on worries about the rate of growth. The concern is that a faster pace of U.S. inflation will prompt the Fed to raise interest rates four times this year, instead of the three anticipated. That implies a rise in the costs of borrowing for companies worldwide.

Check out:What to watch in the CPI report


The U.S. consumer price index is forecast to come in at 0.2%, compared with 0.5% in January, owing to lower gasoline prices. The annual inflation rate is running at 2.2%, and at 1.8% excluding food and energy prices. The report is due at 8:30 a.m. Eastern Time, or 12:30 p.m. London time.

The eurozone's final reading of consumer price inflation for February is scheduled for release on Friday.

What strategists are saying

"Well-received corporate results and a tough stance against protectionism have been an aspirin for Europe's Trump tariff headache. The Xetra DAX benefited from solid results by German utilities firms," said Jasper Lawler, London Capital Group's head of research, in a note.

"A little apprehension about the U.K. Spring Statement has held back the FTSE 100. Chancellor Phillip Hammond has rejigged the Spring Statement as a non-event with no tax or spending changes to be announced. The only hope for a market reaction will be to the new OBR forecasts, which are expected to revised higher," he said.

Stocks in focus

E. ON SE shares (>> company sheet) jumped 5.1% as the German utility said it will raise its dividend, and said it swung to a yearly net profit of EUR3.93 billion ($4.85 billion), aided by a reduced tax rate. E.ON also expects to cut around 5,000 jobs during the integration of Innogy SE , which it will take over through an asset-swap deal with RWE AG.

RWE rose 1% after the utility said it swung to a 2017 net profit .

Actividades de Construccion y Servicios SA (>> company sheet) rose 2.2% in Madrid following reports late Monday the company and Italy's Atlantia are close to reaching a preliminary deal to take joint control of Spanish infrastructure firm Abertis Infraestructuras . Reuters ( quoted two Italian sources as saying an agreement is near. Atlantia shares were off 0.6% and Albertis shares slipped 0.1%.

Antofagasta PLC shares rose 2.2% after the copper producer posted a more than fourfold rise in 2017 net profit .

TP ICAP PLC (TCAP.LN) fell 7.3%, trading at the bottom of the Stoxx 600, as the interdealer broker posted a decline in 2017 pretax profit , to GBP72 million ($99.9 million) from GBP167 million a year ago.

Iliad SA shares (>> company sheet) pulled back 7%, with the French telecommunications company's 2017 earnings report showing net profit was essentially flat despite a 5.6% rise in revenue that was largely driven by its mobile business.

Direct Line Insurance Group PLC shares fell 2.2% after Deutsche Bank downgraded the car and property insurer's rating to hold from buy.

What's on the economic docket

In addition to the U.S. inflation data, traders will watch for the U.K. Spring Statement on public finances, scheduled for delivery in parliament by Chancellor of the Exchequer Philip Hammond at 12:30 p.m. London time, or 8:30 a.m. Eastern Time.

The statement should include the Office for Budget Responsibility's economic growth forecasts and a cut in the estimate for how much the government will need to borrow in 2017-2018.

In addition, the OBR is expected to provide an estimate on how public finances will be affected by payments the U.K. will make to the European Union as a result of Brexit.

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