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European shares dip as commodity stocks weigh ahead of inflation data

November 01, 2022 00:00:00

European shares edged lower on Monday, led by declines in mining and energy stocks, while market participants awaited a key euro zone inflation print that will likely show prices scaling record highs in October, reports Reuters.

The STOXX 600 index had slipped 0.1 per cent by 0925 GMT after closing higher on Friday, with miners down 0.1 per cent while energy stocks fell 0.2 per cent.

Prices of crude oil and industrial metals took a beating after China posted weaker-than-expected factory activity data and as concerns grew its widening COVID-19 curbs would hurt demand.

Meanwhile, euro zone inflation is seen hitting a record 10.2 per cent in October, in what will likely make for yet another uncomfortable reading for the European Central Bank (ECB), which is targeting a 2 per cent price growth.

The sharp rise seen in last week's inflation numbers from Germany will likely manifest itself in the final euro zone reading, according to Michael Hewson, chief market analyst at CMC Markets UK.

"This is the nightmare scenario for the ECB, as the pressure to hike further will only increase at the same time as the economy continues to slow," Hewson said.

The ECB doubled its deposit rate to 1.5% last week and promised more tightening in the months to come even if it pushes the bloc into recession.

The STOXX 600 was headed for its first monthly gain in three, rising 5.7% so far in October on the back of a better-than-expected reporting season and hopes that the U.S. Federal Reserve would slow its pace of interest rate hikes.

The Fed is widely expected to raise its benchmark lending rate by 75 basis points this week, but markets remain hopeful that the central bank will deliver a smaller 50-bp increase in December.

Separately, data showed the Swiss National Bank's (SNB) balance sheet shrank by nearly 8% in September, as plunging valuations on its stock and bond investments and the high value of the Swiss franc reduced the value of its foreign investments.

Among individual stocks, Credit Suisse (CSGN.S) rose 2.5% as it unveiled details of its plan to raise 4 billion francs ($4.01 billion) from investors.

Fresenius Medical Care (FMC) (FMEG.DE) jumped 4.4% after the German dialysis provider on Sunday reported third-quarter earnings above market expectations.

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