MW: European stocks drop after euro-zone inflation data
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets moved lower on Friday after better-than-expected euro-zone inflation data eased pressure on the European Central Bank to cut rates at its meeting next week.
The Stoxx Europe 600 index XX:SXXP -0.33% fell 0.2% to 336.47, trimming its monthly gain to 4.3%.
Shares of Serco Group PLC UK:SRP +7.13% led the list of gainers, rallying 8.7%, after the government-services company appointed Aggreko PLC’s UK:AGK -3.74% Rupert Soames as chief executive from June 1.
Old Mutual PLC UK:OML +6.23% advanced 4.7% after the investment firm lifted its full-year dividend and said adjusted operating pretax profit rose last year on a constant currency basis.
On a more downbeat note, shares of Pearson PLC UK:PSON -7.53% slumped 6.1% after the publisher said full-year operating profit declined due to weakness in its U.S. education business.
More broadly, the main event on Friday was the consumer data for February, surprisingly showing that inflation remained at 0.8%. Economists worried inflation would drop as low as 0.6%, amid speculation weak price developments would trigger more easing action from the European Central Bank at its meeting next week. After the data, however, analysts said ECB President Mario Draghi now has more breathing space and is facing less pressure to cut interest rates.
“The odds are stacked in favor of no further reaction from the ECB after this inflation number, the most we could get, could be a little nudge on the forward guidance,” said Naeem Aslam, chief market analyst at Ava Trade, in emailed comments.
Draghi stressed late Thursday that the euro area clearly is not in deflation at the moment , but that the central bank is ready to act if needed, according to Reuters.
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Additionally, data showed unemployment in the euro zone stayed at 12% in January.
After the releases, most of the country-specific indexes in Europe declined as the anticipation for more ECB easing measures waned. France’s CAC 40 index FR:PX1 -0.40% lost 0.3% to 4,383.39 and the U.K.’s FTSE 100 index UK:UKX -0.14% dropped 0.1% to 6,801.76. Germany’s DAX 30 index DX:DAX +0.03% rose 0.1% to 9,593.33.
U.S. stock futures pointed to a lower open on Wall Street after the S&P 500 index SPX +0.50% closed at an all-time high on Thursday. The optimistic sentiment was spurred by dovish comments from Fed chief Janet Yellen, who reaffirmed the central bank’s accommodative policy and assured markets that the Fed can make adjustments to tapering if needed.
