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Europe midday: Stocks hold near highs, US CPI ahead

By Alexander Bueso

Date: Wednesday 14 Feb 2018

Europe midday: Stocks hold near highs, US CPI ahead

(ShareCast News) - Stocks across the Continent are trading near their session highs ahead of a key report on consumer prices on the other side of the Pond later in the day.
Acting as a backdrop, politics were the name of the game after German SPD leader Martin Schulz stepped down as party head on Tuesday evening.

On a related note, earlier economists at Barclays said domestic demand in the euro area's largest economy could be expected to remain weak until political uncertainty in the country was removed.

Their comments came on the heels of the latest GDP print out of Germany on Wednesday morning revealing stagnant household consumption acted as a drag on economic growth in the fourth quarter of 2017.

"Despite the tailwind from the Global economy, we expect domestic demand to remain weak until the political uncertainty is resolved. Whether or not this resolution occurs in Q1 2018 heavily depends on the outcome of the SPD party member vote on the 4 March," they said.

Against that backdrop, as of 1145 GMT the benchmark Stoxx 600 was 0.77% or 2.84 points ahead to 373.42, alongside a rise of 0.73% or 89.36 points on the German Dax to 12,286.47.

Italy's FTSE Mibtel was still the laggard, but recovering some ground, rising 0.44% or 96.77 points to 22,130.25.

Still ahead, the Bureau of Labor Statistics was set to release January's consumer price index report at 14:30 GMT.

Commenting on the possiblities for that key release, Jim Reid at Deutsche Bank said analysts at the broker were heart torn (on St.Valentine's Day). Their long-standing forecast had been for inflation to make a comeback in 2018 - but perhaps not today.

The house forecast at the German investment bank is for core US CPI to tick-down in January year-on-year. As an aside, Reid mentioned the added uncertainty around Wendesday's print, given the BLS's recently updated seasonal adjustment factors.

They implied that CPI would be 4 basis points less than what otherwise might be expected. That could easily mark the difference between January's reading being marked up, or down, he said.

Trade tensions were also in the news on Wednesday morning, with German business lobby BDI reportedly warning the US risked a dangerous spiral if it moved on the White House's suggestions of fresh taxes on countries that imposed tariffs on American goods.

Separately, Bundesanzeiger reported on US hedge fund Bridgewater's decision to enter into short positions on several of the country's blue-chip names, including Deutsche Bank, Allianz and BASF.

Meanwhile, in economic news, Germany's Ministry of Finance reported that the rate of growth in the country's gross domestic product slowed from a 0.7% pace quarter-on-quarter for the three months to September to 0.6% for the fourth quarter of 2017 (Barclays: 0.7%). Government statisticians also revised lower their estimate for third quarter GDP growth from 0.8% to 0.7%.

On a more positive note, according to Eurostat, Eurozone industrial production was ahead by 5.2% year-on-year in December (consensus: 4.2%).

Back in the corporate patch, industrial conglomerate Thyssen Krupp posted a 52% jump in first quarter 2018 profitability.

Elsewhere, French lender Credit Agricole posted a 33% rise in quarterly profits on the back of the solid performance put in by investment banking unit.

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