Europe Markets: European stocks swing after U.S. inflation heats up

European stocks were whipped around Wednesday after the rate of monthly U.S. inflation exceeded expectations, underscoring concerns that rising consumer prices will lead to higher borrowing costs.

How markets are moving

The Stoxx Europe 600 index SXXP, +0.71%  was up 0.4% at 372.16, but had flipped lower in the wake of U.S. figures on January inflation and retail sales. The European index had been up as much as 0.9% intraday. On Tuesday, the index lost 0.6%.

Also digging out of the red post-data, Germany’s DAX 30 index DAX, +0.69%  was up 0.3% to 12,236.53, and France’s CAC 40 index PX1, +0.84% gained 0.4% to 5,130.31.

Spain’s IBEX 35 IBEX, +0.33%  picked up 0.2% to 9,666.90. The U.K.’s FTSE 100 UKX, +0.67% was up 0.5% at 7,205.77.

The euro EURUSD, +0.1781%  bought $1.2323, down from $1.2354 late Tuesday in New York.

In the fixed-income market, the yield on the 10-year German bund TMBMKDE-10Y, +0.43% reversed course and rose 2 basis points to 0.755%.

10-year German bund yield spikes up after U.S. inflation report.

What’s driving the market

European stocks briefly swung lower and U.S. stocks SPX, +0.39% DJIA, +0.25%  opened in the red after the U.S. consumer-price index leapt 0.5% in January, the biggest increase in five months. Economists surveyed by MarketWatch had forecast a 0.4% increase. The CPI over the past 12 months was unchanged at 2.1%, but was above the 1.9% consensus estimate.

European stocks were higher ahead of the inflation report. The recent spike in volatility and violent selloffs in global markets have emanated in part from worries that higher inflation will lead the Federal Reserve to hike up interest rates at a faster-than-expected pace.

Also Wednesday, U.S. retail sales dropped 0.3% in January, the biggest drop in nearly a year.

European stocks early Wednesday also got a boost after data showing Germany’s gross domestic product expanded by 0.6% in the fourth quarter and by 2.9% a year earlier. The growth was aided by demand for German exports, although the figures indicated slight easing from 0.7% in the fourth quarter.

What strategists are saying

“Given the data it seems unlikely the Fed will shy away from a rate hike in March. It would, in fact, seem all but guaranteed following the appointment of Jerome Powell earlier this month as Fed chair,” said Jacob Deppe, head of trading at Infinox, in a note.

“The fear is the Fed hikes too far, too fast, U.S. monetary policy will have to walk a tightrope in order not to kill off growth, while steering a path towards normal economic conditions. Mr. Powell has an unenviable task ahead of him,” said Deppe.

Stock movers

Credit Suisse Group AG CSGN, +2.97% CS, +3.39%  gained 2.5% after the bank posted a narrower-than-expected loss of 2.13 billion Swiss francsin the fourth quarter. The lender did post its third straight full-year net loss.

Sky PLC shares SKY, +2.17% leapt 2.3% after the broadcaster extended its rights to show Premier League soccer matches through 2022, at a cost of 1.19 billion pounds ($1.65 billion) a year.

Economic data

The second reading of eurozone GDP in the fourth quarter came in at 0.6% from Eurostat, meeting expectations. Separately, eurozone industrial production increases at a 0.4% rate in December, above the 0.2% FactSet estimate.

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