Europe close: Stocks little changed ahead of Fed meeting
European shares finished higher but off their morning highs, as hopes of a swift economic recovery from the Covid-19 pandemic offset a higher-than-expected reading on inflation in the States.
The pan-European Stoxx 600 was up 0.11% at 458.81, with Germany’s DAX rising 0.36% to 15,792.52 and the UK's FTSE 100 up 0.36% to 7,172.48 after a fall in the unemployment rate in April.
Investors were also waiting on the US Federal Reserve's two-day policy meeting which was set to finish the next dat, for indications of the central bank view on recent inflation rises.
Ahead of the Fed meeting, the Department of Labor reported that US producer prices picked up from April's annual rate of increase of 4.1% to 4.6% for May.
As Ian Shepherdson, chief economist at Pantheon Macroeconomics put it: "The Fed is not driven by the PPI, but the numbers are startling."
On a more constructive note, ahead of those numbers, Markets.com analyst Neil Wilson had told clients: "Rates have been steady coming into the meeting with the benchmark 10-year (bond) yield hovering a little below 1.5% and have been edging lower since the end of March - allowing growth stocks to catch some bid in recent weeks.
"The calm shows markets are broadly in tune with what the Fed’s views so far, but this can shift if the Fed acts too early or delays too long. Indeed, today’s Bank of America fund manager survey shows 72% think inflation is transitory, which pretty much tells you all you need to know about market positioning."
In the UK, figures released earlier by the Office for National Statistics showed the UK unemployment rate fell in April as the economy began to reopen. The unemployment rate declined to 4.7% in the three months to April from 4.8% in March and in line with consensus expectations.
In equity markets, shares in Non-Standard Finance plummeted, after the doorstep lender confirmed plans for an £80m equity capital raise.
NSF announced in February that it needed more capital to avoid breaching its covenants. The lender has been hit hard by the pandemic, with its loan book at the end of 2020 down 27% on 2019.
Anglo American shares were hit by a downgrade to ‘sector perform’ from ‘outperform’ at RBC Capital Markets.