Europe close: Stocks close above the line despite high inflation
By Josh White
Date: Wednesday 17 Nov 2021
(Sharecast News) - European shares managed to stay above the waterline on Wednesday, despite data showing persistent rising inflation in the eurozone and the UK.
The pan-European Stoxx 600 was last up 0.17% at 490.1, while Germany's DAX was 0.02% firmer, and the CAC 40 in France gained 0.06%.
"Today's release of eurozone inflation data confirmed that inflation rose to a 13-year high last month," said Pantheon Macroeconomics senior Europe economist Melanie Debono.
"The increase was largely driven by soaring energy inflation."
Debono said that looking ahead, headline inflation was set to remain high throughout the fourth quarter.
"It will then fall off a cliff in the first quarter due a drop in the core rate as base effects from last year's temporary VAT cut in Germany fall out of the annual calculation in January."
Indeed on the data front, eurozone inflation rose to a 13-year high in October as expected, as rising energy prices hit household budgets.
Headline annual inflation rose to 4.1% from 3.4% a month earlier, matching an earlier estimate and market expectations.
The increase was driven by the surging cost of energy, which offset downward revisions to food, alcohol and tobacco price rises, while the core rate nudged higher by 0.1 percentage point to 2%, just below the initial estimate and consensus of 2.1%.
In the UK, meanwhile, consumer price inflation came in at an annual 4.2% in October, the highest for almost a decade, with energy and second-hand car costs soaring.
Central banks have been publicly struggling to judge whether rising prices are the result of short-term factors as economies reopen, or were becoming entrenched.
European Central Bank president Christine Lagarde said on Monday that price inflation would be more intense and long-lasting than expected, but that tightening monetary policy could stall the recovery.
"Although the ECB has stated that it sees the current price pressures easing in 2022, and our baseline is that monetary policy will remain accommodative, the latest data will indeed reignite the debate on policy measures," said Katharina Koenz at Oxford Economics.
"However, there isn't much the ECB can do about higher energy prices and supply bottlenecks in the short-term anyway.
"Moreover, we still expect energy price pressures to fall back sharply next year thanks to an easing of the supply constraints."
Koenz stuck to expectations that inflation would "slow meaningfully" over the course of the second half of 2022 heading towards 1% towards the end of the year.
In equity news, Siemens Healthineers gained 5.6% after raising total synergy targets for its recent acquisition of US rival Varian.
On the downside, Poland-based parcel locker company InPost plunged 13.15% after cutting its full-year guidance amid slower-than-expected growth in the e-commerce market.
Shares in thermal energy management and pumping firm Spirax‐Sarco Engineering fell 5.32% after it said it still expected to report record annual profits, though it also warned that supply-chain issues were hurting margins.
Renewable energy supplier SSE was 4.28% lower despite posting a rise in profits and announcing a 65% hike in its capital expenditure programme.
Swedish online gambling giant Evolution tumbled 5.02%% on allegations it had been offering its services illegally in countries that are currently under US sanctions.
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