By Shubham Batra and Amruta Khandekar
(Reuters) -Europe’s blue-chip stocks hit their highest in 22 years on Wednesday as investors sought mega-cap quality stocks and as cooling U.S. inflation buoyed markets.
The blue-chip STOXX 50 index was last up 0.1%, coming off its highest level since 2001, which it had hit prior to the inflation data.
The pan-European STOXX 600 index rose 0.2%, also having pared some early gains.
A U.S. Labor Department report showed the Consumer Price Index climbed 0.1% last month after advancing 0.4% in February. In the 12 months through March, it has increased 5%, the smallest year-on-year gain since May 2021.
The data bolstered hopes that the Fed could potentially hit the brakes on its interest rate hikes soon, especially after a banking crisis that has raised fears of a recession.
A majority of traders, however, still expect the Fed to hike rates by 25 basis points in May.
“Today’s fall in the rate of inflation is likely to be welcomed by investors, who may speculate that the Fed could soon pause its cycle of monetary tightening,” said Richard Flynn, Managing Director of Charles Schwab UK.
“That being said, whilst the rate of inflation has fallen, it remains far above the Fed’s two per cent target. Officials have been laser focused on fighting inflation and may decide that additional tightening is required to achieve its target when the FOMC meets later this month.”
European Central Bank officials have been voicing concerns about sticky inflation, with Austrian Central Bank chief Robert Holzmann telling a German newspaper that another 50 basis point rate hike may be needed in May.
Investors are still digesting the International Monetary Fund’s warning that lurking financial system vulnerabilities could erupt into a new crisis and slam global growth this year.
Luxury group LVMH, Europe’s most valuable company, is due to report first-quarter sales after markets close.
Shares of AB Volvo jumped 7.2% as the truck-maker reported record first-quarter profit on higher revenue and margins.
Shares of Deutsche Bank rose 1.2% as the bank winds down its remaining software technology operations in Moscow to end two decades of reliance on Russian IT expertise, the Financial Times reported.
Mercedes-Benz Group gained 1% after its first quarter sales rose on a boost from electric vehicles and premium cars.
(Reporting by Shubham Batra and Amruta Khandekar in Bengaluru; Additional Reporting by Sruthi Shankar; Editing by Sonia Cheema and Arun Koyyur)
