Europe midday: Stocks extend gains as inflation falls ahead of ECB decision

(Sharecast News) - Stock markets rose strongly on Thursday after a lower-than-expected inflation print reinforced expectations of an interest-rate cut from the European Central Bank later on. After a tentative start, the Stoxx 600 was up 0.74% at 523.42 by lunchtime, with strong gains in Paris (+1.2%) and Milan (+1.1%) met with milder gains in London (+0.4%) and Frankfurt (+0.8%).

Eurozone inflation figures for September were revised lower on Thursday, falling further below the European Central Bank's target of 2% to levels not seen since April 2021.

The annual rate of consumer price inflation came in at just 1.7% last month, Eurostat announced. This was down from the flash reading of 1.8% released two weeks ago and well below the 2.2% rate registered in August. Across the eurozone, services inflation eased to 3.9% from 4.1% the month before, while energy prices tumbled 6.1% after a 3.0% decline the previous month.

The ECB is widely expected to cut interest rates at 1415 CEST in response to the big slowdown in inflation and concerns about the German economy. Analysts widely expect the monetary authority's deposit facility rate to be lowered by 25 basis points to 3.25%, with a further one to two cuts pencilled in by the end of the year.

"The ECB has little choice but to cut. Germany's economy is continuing to show signs of struggle. German investor confidence was weaker than expected this week, and a number of Eurozone economies have extremely low levels of inflation," said Kathleen Brooks, research director at XTB.

Market movers

Nokia fell 4% as the Finnish telecoms giant said that operating profits this year would come in at the lower end of the €2.3bn-2.9bn guidance range.

Pest control services group Rentokil Initial surged 9% in London after reassuring investors with unchanged guidance following two profit warnings already this year. The company reported a steady third quarter with revenues unchanged year-on-year at £1.38bn.

German pharma and lab equipment group Sartorius Stedim Biotech jumped 15% after reiterating its full-year outlook. "In view of the figures for the first nine months, we are convinced that we will achieve our targets for fiscal 2024, and are optimistic for the future," said chief executive René Faber.

Leading the fallers was UK paper and packaging group Mondi, dropping 6% after underlying core profit fell in the third quarter in "muted" trade, mainly due to more planned maintenance shuts.

Nestle rose despite the Swiss food manufacturer cutting its organic sales growth forecasts for the second time this year to 2%. The company trimmed its estimate from 3%, which had already been lowered from 4% initially.

French advertising group Publicis edged higher after lifting its full-year organic revenue forecast to 5.5% from 5% despite a "challenging" macro environment, as it reported a jump in third-quarter revenues.