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 (.STOXX) 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.