Europe midday: Shares rally on strong corporate updates

European shares swung into positive territory at midday on Wednesday as upbeat corporate updates outweighed worries over interest rate rises.

The pan-European Stoxx 600 index was up 0.30% after sharp falls in the previous session Tuesday. US 10-year and five-year Treasury yields held near two-year highs overnight, while global tech stocks were sold off again as inflationary pressures hit sentiment.

The benchmark German 10-year bond yield also rose above 0% for the first time since May 2019.

In the UK, the FTSE 100 rose 0.24% after figures from the Office for National Statistics showed that consumer price inflation rose to 5.4% from 5.1% in November, coming in above consensus expectations of 5.2% and well above the Bank of England’s 2% target.

Core CPI inflation - which strips out volatile elements such as food and fuel - increased to 4.2% in December from 4.0% the month before, coming in above consensus expectations of 3.9%.

Meanwhile, the retail price index rose to 7.5% from 7.1% in November - its highest level since 1991. Analysts had been expecting 7.1%.

The BoE’s next policy meeting is on 3 February. At the last meeting in December, the Bank raised rates for the first time since the onset of the Covid pandemic, by 15 basis points.

In equity news, luxury stocks were in demand after Cartier owner Richemont said strong demand for its jewellery and watches in the Americas and Europe helped quarterly sales rise by nearly a third.

UK fashion retailer Burberry rallied after it reported a 5% rise in third-quarter revenues and lifted annual profits guidance driven by an acceleration in full price sales. The company said revenue for the 13 weeks to December 25 came in at £723m compared with £688m.

Educational publisher Pearson gained more than 7% as it raised annual profits guidance, driven by its assessment and qualification business.

Housebuilder Crest Nicholson and travel retailer WH Smith were higher after well-received trading updates, while pub chain JD Wetherspoon ticked up despite warning it would swing to an interim loss.