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European stocks rally on unexpected easing of Eurozone inflation

EditorPollock Mondal
Published 2023-10-31, 10:34 a/m
© Reuters.

European stocks experienced substantial gains today, following an unexpected easing in Eurozone inflation. The Stoxx 600 index rose by 0.7% as the single-currency consumer price index (CPI) saw a year-on-year increase of only 2.9% in October. This marks a two-year low, down from September's 4.3%, primarily due to energy price deflation and reduced food price inflation.

Analysts from Oxford Economics and Pantheon Macroeconomics have suggested that this trend could lead to earlier-than-expected rate cuts by the European Central Bank (ECB), potentially in Q2 2024. This anticipation comes despite a surprising 0.8% drop in Germany's retail sales for September.

Italian banks, including Bper Banca, Banca Monte Paschi Siena, and Banco Bpm, significantly contributed to the FTSE MIB's gain of 1.4%, outperforming other indices. Despite a considerable 13% rise in Q3 net profits, shares of Spanish bank BBVA (BME:BBVA) fell.

Belgian drinks company AB InBev reported a 5% increase in Q3 revenue, leading to an uptick in share prices. However, oil giants BP (NYSE:BP) and Shell (LON:SHEL) saw their shares decrease after missing Q3 profit forecasts.

In contrast, Deutsche Bank (ETR:DBKGn) and Commerzbank (ETR:CBKG) shares performed well today. CaixaBank and Bankinter initially experienced a drop but moved into positive territory by midday.

AB InBev announced a Q3 revenue increase of 5% to $15.1bn and a 4.1% EBITDA rise, maintaining its medium-term EBITDA growth guidance of 4-8%. Meanwhile, BP recorded an underlying replacement cost profit of $3.3bn for Q3, missing forecasts, similar to Shell's performance.

While the recent easing of inflation has provided a boost to European stocks, analysts warn of potential risks related to high services inflation and wage dynamics. Pantheon Macroeconomics predicts a faster core inflation decline than the ECB's projection by March 2024, potentially triggering the first rate cut.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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