Europe midday: Shares extend gains as EZ CPI cooling confirmed

European shares extended gains on Wednesday as investors digested an unchanged monetary policy by the Bank of Japan, UK CPI data and confirmation of an easing of inflation in the eurozone.

The pan-European Stoxx 600 was up 0.38% by 1200 GMT. Britain’s FTSE 100 was up on the back a slight easing in inflation last month, although food prices hit another 45-year high, according to official data.

Consumer Prices Index inflation fell to 10.5% in December from 10.7%, offering a further sign that the cost-of-living crisis may have passed its peak.

“As energy prices retreat, inflation is finally climbing down from its dizzying heights but it’s far from a vertiginous descent. Core prices, stripping out volatile energy and food costs also dropped back to 6.3% from 6.6%,” said Hargreaves Lansdown analyst Susannah Streeter.

“But with the headline rate of inflation still firmly in double digits there is still a long way to go before the price spiral is under control, particularly given that services inflation heated up again, rising from 6.3% in November to 6.8% in December.

“Food prices have continued their upwards march with higher prices in supermarkets, restaurants and hotels keeping the headline rate elevated. There have been warnings from industry bosses that prices will take considerable time to come down.”

Meanwhile eurozone CPI eased in December, according to figures released on Wednesday by Eurostat, in line with an earlier flash estimate.

Final inflation was confirmed at 9.2% year-over-year, down from 10.1% in November. This was due mainly to lower energy inflation, with energy prices in the bloc up 25.5% on the year in December, down from 34.9% growth the month before.

In Asia, the Bank of Japan surprised markets and left its yield curve control (YCC) measures unchanged as it maintained its cheap-money policy, sparking a surge in equities, but sending the domestic currency lower.

Markets had been expecting a change to the BoJ’s super-loose monetary policy after the central bank in December allowed the yield of the 10-year bond to move 0.5% away from its 0% target, instead of the previous 0.25% range limit set.

The BoJ kept short-term policy rates at -0.1% and long-term rates at around 0%. The tolerance range for 10-year government bond yields, which was expanded at the last meeting, was also maintained at +/-0.50%.

In equity news, Dutch semiconductor supplier ASM International was up after reporting fourth-quarter revenue ahead of its forecast.

Luxury consumer goods group Richemont rose after reporting higher quarterly sales as tourists returned to Europe and Japan.

Shares in online delivery company Just Eat Takeaway.com surged after the company confirmed it was putting profitability over growth even as fourth-quarter orders slumped.

Automotive fluid system maker TI Fluid Systems slumped as it warned of a hit to sales in China from Covid restrictions and factory shutdowns last month, along with a switch to electric vehicles in the country.

Reporting by Frank Prenesti for Sharecast.com