European markets advance, looking past growth worries

  • Data releases from Europe on Wednesday included the latest euro zone unemployment figures for July, German retail sales for July and August manufacturing PMI data for a handful of European countries.
  • Investors are focused on August U.S. nonfarm payrolls data, which is scheduled to be released later this week, for insight into the possible path of Fed's monetary policy.

LONDON — European stocks advanced on Wednesday after euro zone inflation data on Tuesday rattled market sentiment in the region.

The pan-European Stoxx 600 added 0.6% by early afternoon, with travel and leisure stocks jumping 2.1% to lead gains while basic resources slid 0.8%.

The positive start to the session came after markets were rattled on Tuesday following the release of euro zone inflation data for August which showed consumer prices increased by 3% this month from a year ago, according to preliminary estimates.

This was far above expectations and the European Central Bank's 2% target. The data will put pressure on the central bank to address inflation concerns at a key meeting next week.

Overnight, shares in Asia-Pacific were mostly higher in Wednesday trade, despite a private survey showing shrinking Chinese factory activity in August.

The Caixin/Markit manufacturing Purchasing Managers' Index for August came in at 49.2 on Wednesday, below the 50 mark that separates expansion from contraction.

The Wednesday private survey release came after the official manufacturing PMI released Tuesday showed slowing Chinese factory activity growth in August, coming in at 50.1 against July's reading of 50.4.

U.S. stock futures were slightly higher in early premarket trade after the S&P 500 notched a seven-month win streak in August.

Investors are focused on August U.S. nonfarm payrolls data, which is scheduled to be released later this week, for insight into the possible path of Fed's monetary policy. Dow Jones economists expect 750,000 jobs were created in August and the unemployment rate fell to 5.2%.

Data and earnings

German retail sales slipped by more than expected in July, the Federal Statistics Office said Wednesday, dropping 5.1% month-on-month in real terms against a Reuters forecast for a 0.9% fall. This followed gains of 4.5% in June and 4.6% in May.

The final August manufacturing PMI (purchasing managers' index) reading for the euro zone came in at 61.4, slightly below an initial flash estimate of 61.5, as factory growth and price rises remained strong.

The U.K. suffered contrasting fortunes as supply chain problems pulled the manufacturing PMI down to 60.3 from July's 60.4. IHS Markit's gauge of U.K. factory production slid to its lowest level since February.

Spain's manufacturing PMI came in at 59.5, an acceleration from 59.0 in July. However, supply chain disruptions and raw material supply and demand discrepancies mean manufacturing confidence dropped off.

On the earnings front, Swedish airline SAS posted a 1.36 billion Swedish krone ($160 million) net loss for the third quarter as travel restrictions continued to cause headwinds for air travel. Shares edged 0.1% higher by early afternoon.

French alcoholic beverage company Pernod Ricard beat full-year 2020/21 operating profit expectations and announced the restart of a 500 million euro ($590 million) share buyback program. The company's shares gained 2.9%.

At the top of the Stoxx 600, British publishing firm Informa gained 4.7%.

At the bottom of the index, Carrefour dropped 4.2% after LVMH Chairman and CEO Bernard Arnault sold his 5.7% stake in the French retailer.

British retailer WH Smith fell 4% after forecasting that profits for the year ending August 2022 will be toward the lower end of market expectations.

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- CNBC's Eustance Huang and Tanaya Macheel contributed reporting to this story.