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Consumer prices moved up 5.1 percent from January 2021 and up from 5 percent in December. Inflation data from Germany and France fuelled expectations of a hawkish shift from the ECB, while analysts have updated their forecast for eurozone inflation for the first month.
Commerzbank rates strategists, Rainer Guntermann and Hauke Siemssen cautioned that “The European Central Bank’s take on more persistent inflation will be crucial tomorrow.
“The ECB should find it increasingly hard to justify its ‘look-through’ approach and Lagarde, in all likelihood, will have to answer some tough questions, with the Fed poised for lift-off next month and the Bank of England hiking further tomorrow – therefore, the risk for an accelerated ECB exit is on the rise.”
Markets have reached up to their rate-hike expectations in recent weeks, with at least two rate rises priced in even as the ECB remains its dovish stance.
Financial stocks rose 1.1 percent, heading for their best week in nearly three months, on prospects of a higher interest rate environment.
The STOXX 600 this week has so far retraced more than half of January’s steep 4 percent losses, as strong fourth-quarter earnings counter some monetary tightening jitters, despite fears of more persistent inflation.
Tech stocks rose 1.0 percent, tracking Nasdaq’s overnight gains, and as Alphabet posted record quarterly revenue.
British online supermarket group, Ocado, was the top performer, gaining 7.3 percent after Credit Suisse double upgraded the stock to “outperform” from “underperform”.
Swedish industrial technology group, Hexagon, gained 3.3 percent, after beating market expectations with record quarterly earnings.
German chip supplier, Siltronic, added 2.0%, after posting 17% higher quarterly earnings and saying it expected semiconductor demand to increase.
Novo Nordisk jumped 13.4 percent despite missing expectations for fourth-quarter operating profit, as the Danish drug developer said it aimed to generate sales growth of between 6 percent and 10 percent in local currencies in 2022.
Swedbank dipped 4.1% after posting a fourth-quarter operating profit that was slightly lower than expected, as weaker results from fixed-income trading weighed.
Switzerland’s third-largest listed bank, Julius Baer, was the worst performer on the index, falling about 5 percent to a two-month low, as analysts flagged a miss on costs after the firm’s earnings release.