Europe close: Stocks rally on softer-than-expected US CPI report
European shares rallied as investors cheered another softer-than-expected reports on US consumer prices, while German inflation decelerated from a 70-year high.
The pan-European Stoxx 600 index edged up 1.29% to 442.60, with major regional bourses all higher, including a 1.34% advance for the German Dax that took it to 14,497.89.
Economists expected a 0.3% increase to the US CPI on a monthly basis in November, or an annual pace of 7.3%, whereas it came in at up by 0.1% on the month and 7.1% in annual terms.
"More immediately, this report does not change tomorrow's Fed decision; they will hike by 50bp. But Chair Powell's tone likely will be less aggressively hawkish than in November, and his more dovish colleagues likely will be emboldened by this report," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"We now think 25bp is more likely on Feb 1, and we think that will be the final hike."
In Germany, CPI rose by 10% year-on-year in November, shrinking by 0.5% from the previous month, in line with forecasts. On an EU-harmonised basis, annual inflation was 11.3% while there was no monthly change.
Meanwhile, the ZEW business confidence survey for December showed the investor expectations index rose to -23.3 from -36.7 in November, coming in above consensus expectations for a reading of -26.4.
The current conditions index improved to -61.4 in December from -64.5 a month earlier, but was below consensus expectations of -57.0.
Later during the same week, the Fed, European Central Bank and the Bank of England were all expected to raise rates by 50 basis points, rather than the aggressive 75 point hikes seen earlier in the year.
In equity news, shares in banking software company Temenos rose more than 4% after it extended a deal with an unnamed US financial institution to include its international private banking business.