European shares rise with focus on German inflation data

European shares rose on Tuesday as investors awaited consumer prices data from the region’s largest economy, Germany, while a jump in energy stocks lifted UK’s FTSE 100 in its first trading day of the year.

The pan-regional STOXX 600 rose 1.6% in early trading, to its highest level in more than two weeks.

Germany’s CPI data, due at 1300 GMT, could provide a preview for inflation in the euro zone, with investors waiting to see if cost pressures in the region have weakened after the European Central Bank’s aggressive monetary policy tightening.

German consumer prices, harmonised to compare with other European Union countries, are expected to have risen by 10.7% on the year in December in the preliminary reading, compared to an 11.3% increase in November.

“If we see a slowdown in German and the euro zone CPI which is due later this week, it could help European stocks gain a little bit, but it may not change the ECB’s hawkish stance,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

French Prime Minister Elisabeth Borne said inflation was expected to peak at the start of 2023 before then retreating.

European stocks ended their first session of the year higher on Monday after euro zone manufacturing data suggested the worst had passed as supply chains begin to recover and inflationary pressures ease.

“We saw very effective PMI figures and we are also seeing the natural gas futures continue to dive, which means that the energy cost for European companies is getting cheaper due to the very mild weather that we have right now in Europe,” said Ozkardeskaya.

Data on Tuesday also showed material shortages eased further in Germany’s manufacturing sector towards the end of the year.

UK’s FTSE 100, which has been closed since a shortened session on Friday, rose 2.1% on Tuesday to briefly touch its highest level since June 2022 supported by a jump in oil majors BP and Shell.

European shares start 2023 on upbeat note on encouraging factory data

Among individual movers, Deutsche Bank rose 1.3% after the German lender’s finance chief told daily Boersen-Zeitung it is on track with its restructuring targets and will retain its forecasts until 2025 despite the risks from the Ukraine war, aggressive inflation and recession.

Germany’s Brenntag gained 5.6% after the chemicals distributor disclosed it is ending talks with smaller US rival Univar Solutions on a possible takeover.