European Shares Fall on Sticky Inflation Worries; Uk’s Ocado Slides

European shares fell on Tuesday, with UK’s Ocado sinking after a worse-than-expected full-year loss, while data from France and Spain pointed to inflation being stickier than feared.

The continent-wide STOXX 600 index slipped 0.3% in the first hour of trading, after closing sharply higher in the previous session.

“Whether it be Spain, France or Germany, the European Central Bank has to basically take into account stickier inflation because you’re talking about three out of four of the biggest economies in Europe,” said Michael Hewson, chief market analyst at CMC Markets UK.

Higher food prices pushed the 12-month inflation rate in France to 7.2% in February from 7.0% in the preceding month.

In Spain, consumer prices rose 6.1% year-on-year in February, over a 5.9% rise in the 12 months to January.

“So you can’t very well ignore it and consequently, that means we’re going to get 50 basis points in March,” Hewson said.

Investors are expecting the ECB to hike interest rates by 50 basis points in its upcoming March meeting, taking the benchmark rate to 3%. Rates are expected to hit a peak of 4% in July.

Also pressuring European stocks was a rise in euro zone government bond yields, with the yield on Germany’s 10-year bond, the bloc’s benchmark, rising to its highest in over a decade. [GVD/EUR]

Import prices in Germany fell slightly less than expected in January.

European bank stocks, that tend to benefit from a high-rate environment, rose 0.5% and also kept Spain’s lender-heavy IBEX index above water.

The broader STOXX 600 index clocked its worst weekly decline this year on Friday, driven by worries that central banks in the U.S. and euro zone would raise interest rates to tackle stubborn inflation.

The index was still set for its second straight monthly gain.

Swedish heating technology specialist Nibe Industrier slid 7.1%, pulling down the construction & materials index by 0.9% after it said it is in the process of considering a potential acquisition of all or a majority of Japan’s Fujitsu General Ltd.

Bayer fell 3.8% after the agriculture and healthcare company said operating earnings would likely decline in 2023.

Ocado sank 9.6%, to the bottom of the STOXX 600, after the online supermarket and technology group reported a worse-than-expected full-year loss.

Travis Perkins fell 3.7% after Britain’s biggest supplier of building materials posted a 16% decline in annual profits.

(Reuters)

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