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European Shares Seen Higher As Inflation Fears Ease

stockmarkets dec24 12jan22 lt

European stocks are seen opening a tad higher on Wednesday after data showed China's consumer and factory-gate inflation growth both eased last month, giving policymakers scope to cut interest rates.

China's official consumer price index (CPI) rose by an annual 1.5 percent in December, down from a 2.3 percent rise in November on lower food items and gasoline prices, the National Bureau of Statistics said.

December's producer price index decreased to 10.3 percent from a year earlier, down from the 13.5 percent record reached in October.

Asian markets were broadly higher despite a warning from the World Bank that global growth could slow sharply due to Omicron variant of Covid-19.

The World Health Organization has warned that half of Europe will have caught the Omicron Covid variant within the next six to eight weeks.

The United States is approaching the "threshold" of transitioning to living with the coronavirus as a manageable disease, top American scientist Anthony Fauci said.

China is enforcing zero Covid policy to eliminate Covid-19 outbreak before Lunar New Year and the Winter Olympics in Beijing next month.

Industrial metals rose on dollar weakness following Fed chair comments. Gold retreated from a one-week high hit on Tuesday while oil prices traded mixed in Asian trade after climbing nearly 4 percent overnight.

Benchmark 10-year U.S. Treasury yields fell as investors had viewed interest rate hikes as negatively impacting economic growth.

It's a quiet day ahead on the Eurozone's economic calendar, with Eurozone industrial production figures likely to be in focus.

Across the Atlantic, a report on consumer price inflation is likely to attract attention later today along with the Fed's Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts. The PPI will follow on Thursday.

The Senate Banking Committee hearing for Fed vice-chair nominee Lael Brainard will take place on Thursday. Fed officials including Richmond Fed President Thomas Barkin, Philadelphia Fed President Patrick Harker, and Chicago Fed President Charles Evans will also speak on Thursday.

U.S. stocks bounced back overnight and Treasury yields retreated in choppy trade as investors absorbed remarks from the Federal Reserve that interest rates are likely to rise this year, but monetary policy will take a broad and forward-looking view, keeping pace with an ever-evolving economy.

The tech-heavy Nasdaq Composite climbed 1.4 percent, while the S&P 500 added 0.9 percent and the Dow rose half a percent.

European stocks also ended firmly in positive territory on Tuesday, with a rebound in tech stocks along with expectations for a strong earnings season helping underpin sentiment.

The pan European Stoxx 600 gained 0.8 percent. The German DAX rallied 1.1 percent, France's CAC 40 index advanced 1 percent and the U.K.'s FTSE 100 rose 0.6 percent.

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