European equities weakened on Thursday, impacted by unexpectedly high U.S. consumer price inflation figures, which tempered hopes for a more aggressive approach by the Federal Reserve towards further interest rate reductions in the near term.
According to the Labor Department, the consumer price index increased by 0.2% in September, consistent with August's rise, outpacing economists' predictions of a subtle 0.1% uptick. The report further indicated that core consumer prices, which exclude volatile food and energy costs, rose by 0.3% for the second month in a row, surpassing expectations of a 0.2% increase.
Additionally, the annual consumer price growth rate moderated to 2.4% in September from 2.5% in August, a deceleration slightly above economists' forecast of 2.3%. Conversely, the annual rate of core consumer price growth accelerated to 3.3% from 3.2%, contrary to expectations of an unchanged pace.
The CME Group's FedWatch Tool now suggests an 88.4% likelihood of the Federal Reserve cutting rates by 25 basis points in the coming month, following a 50 basis point cut last month.
In European economic developments, Germany's retail sector saw a monthly sales increase of 1.6% in August, building on July's 1.5% growth and recovering from a 1.1% decline in June, as reported by Destatis. On a yearly scale, retail sales increased by 2.1% in real terms and 3.1% nominally.
In the UK, a significant housing market indicator showed positive movement for the first time in nearly two years, buoyed by expectations of further interest rate cuts by the Bank of England.
The pan-European Stoxx 600 declined by 0.18%. The FTSE 100 in the UK fell by 0.07%, Germany's DAX and France's CAC 40 dropped by 0.23% and 0.24%, respectively, while Switzerland's SMI decreased by 0.37%. Other European markets such as Austria, Finland, Greece, and others similarly ended on a weaker note.
Conversely, Denmark, Norway, and Russia experienced gains, with Belgium closing flat.
In the UK equities landscape, Vistry Group plummeted nearly 4%, following a profit warning for the next three years as a result of an underestimation of building costs by 10% in its South division developments. Taylor Wimpey, BAE Systems, and others saw declines ranging from 2 to 4%.
On the positive side, Fresnillo, Beazley, and GSK enhanced their positions by 3.2 to 3.5%. GSK’s gains followed its agreement to settle numerous U.S. lawsuits for up to $2.2 billion.
Several firms, including Endeavour Mining and BP, closed with gains between 1 to 2%.
In Germany, Rheinmetall saw its shares fall by about 3.7%, with Siemens Energy and Deutsche Post also seeing declines. Meanwhile, Munich RE and Hannover Rueck both appreciated by nearly 3%, and Deutsche Telekom advanced 1.7% following its announcement of a proposed buyback program valued at up to €2 billion in 2025.
The French market witnessed Teleperformance losing 2.7% and other firms such as Eurofins Scientific closing 2% lower. In contrast, Engie ended up 1.1%, with moderate advances from Veolia, TotalEnergies, and others.
