Upbeat economic data powers European shares to third day of gains

European shares extended gains on Wednesday as a lower inflation reading from France, the euro zone’s second-biggest economy, and better-than-expected business activity data boosted sentiment.

The pan-European STOXX 600 (.STOXX) rose 0.8%, while France’s CAC 40 (.FCHI) added 1.3%.

Data on Wednesday showed euro zone business activity contracted less than initially thought, suggesting the bloc’s recession may not be as deep as feared.

Further, preliminary data showed inflation in France slipped in December from a record high in the previous month, tracking a slew of encouraging data from improving euro zone manufacturing numbers to a slowdown in Germany’s inflation, reported Reuters.

“This is continuing the narrative that prices are slowing faster than expected, which is certainly welcome news for the euro zone as a whole because it eases the pressure on consumers and also companies,” said Streeter.

The regional STOXX 600 ended 2022 sharply lower on fears of an economic slowdown as central banks raised rates to rein in soaring prices, driven by surging fuel costs since Russia invaded Ukraine and a reopening of the economy after the Covid-19 pandemic.

Investors are now waiting for the minutes from the Fed’s December meeting for cues on the US central bank’s monetary policy tightening path.