Europe midday: Shares off records, but EZ CPI fall boosts rate cut hopes

(Sharecast News) - European shares were up at midday having hit a fresh intra-day record high on Friday as eurozone inflation fell sharply in August, boosting hopes that the European Central Bank would cut rates next month. The pan-European Stoxx 600 was 0.36% higher at 526.46 points, below the new record of 526.66 but still above the previous record of 525.59 set on June 7.

Inflation in the eurozone inflation fell sharply to a three-year low in August, boosting hopes that the European Central Bank will cut interest rates at its next monthly meeting.

Inflation plunged to 2.2%, in line with forecasts and down from July's 2.6%. The news came as Germany and Spain both reported bigger than expected reductions on Thursday.

Economists expect a quarter-point cut in the ECB's benchmark interest rate to 3.5% when policy makers meet on September 12. The ECB cut rates by the same margin in June as inflation moves towards the central bank's 2% target.

Hopes were boosted on Thursday after German and Spanish CPI reports showed better-than-expected falls in prices.

In Germany, preliminary data showed inflation eased to 2% in August, compared with the 2.3% forecast and July's 2.6% reading. Spain's preliminary harmonised inflation came in at 2.4% for August, down from than the previous month's 2.9%.

In the UK, the benchmark FTSE 100 nudged towards its own record high as shares rallied at the open. France's CAC 40 gained after its CPI data showed consumer spending grew in August, while Spain's IBEX 35 was also higher, after retail sales data showed an uptick of 1% in July.

"It's a stark reminder that panicking doesn't do investors any favours, after the global sell-off earlier in the month has largely been brushed aside. Expect to see some drifting on the margin, but there won't be too many catalysts to move markets today, meaning there's every chance this could be the third week of gains in a row for the UK's largest index," said Hargreaves Lansdown analyst Matt Britzman.

On the economic front, German Import prices rose 0.9% in July year on year and up 0.7% from the previous month Federal Statistical Office Destatis said. Import prices in July 2024 fell by 0.4% on June 2024.

In equity news, Ambu slumped 14% after the Danish medical equipment maker reported third-quarter results.

Reporting by Frank Prenesti for Sharecast.com