European stocks held back by inflation worries

European stocks were little changed on Thursday after concerns about US inflation spike offset some relief around property developer China Evergrande and a slew of corporate earnings.

The pan-European Stoxx 600 was flat in morning trade after data on Wednesday showed US consumer prices surged at the fastest pace since 1990, which could compel the Federal Reserve into faster policy tightening.

“There’s a great deal of concern about the rather insane hike in US inflation – a 31-year-high isn’t something to be sniffed at,” said AJ Bell analyst Danni Hewson.

“It’s hard to see that markets think this would be the peak of inflation when you consider external influences, particularly supply bottlenecks and increased commodity prices, as the cost of living goes higher.”

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US data followed numbers from China where producer prices soared to a 26-year high as coal prices surged amid a power crunch.

Euro zone money markets brought forward bets for a European Central Bank rate hike, reflecting a higher shift in US rate-rise expectations.

Supporting markets, however, China-exposed sectors including miners as well as construction and materials gained 1.7 per cent and 1.2 per cent, respectively, as troubled developer Evergrande averted a destabilising default at the last minute for the third time in the past month.

Swiss chemical company Sika jumped 8.5 per cent to hit an all-time-high after agreeing to buy construction chemicals maker MBCC in a $6 billion deal.

Luxembourg-based ArcelorMittal gained 2.7 per cent after reporting its strongest quarter in more than a decade.

Further, Goldman Sachs raised the 12-month price target for the benchmark Stoxx 600 to 530 points from 520 points, saying European earnings have proven resilient to supply chain snags.

Profits of Stoxx 600 companies are expected to jump 60.7 per cent in the third quarter to €104.4 billion from a year earlier, latest Refinitiv data showed, a slight improvement from last week’s 57.2 per cent estimate.

European retail property firms Klepierre, Britain's Shaftesbury and Capital & Counties gained between 0.1 per cent and 1.4 per cent after JPMorgan upgraded the stocks, stating the worst of Covid-19 was "behind us".

However, overall retail stocks were among the biggest drags, led by British discount retailer B&M, which dropped 6.4 per cent after posting lower first-half core earnings. – Reuters