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Europe close: Shares pare gains after US GDP data, Sweden rate hike

Thu 28 April 2022 15:52 | A A A

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(Sharecast News) - European stocks closed in positive territory, but off the days highs as US first-quarter GDP contracted unexpectedly and Sweden's central bank unveiled a surprise hike in interest rates.

The pan-European Stoxx 600 index close 0.62% higher, having been up 1.25% in morning trade as investors digested another earnings and corporate news dump.

Data from the US Commerce Department revealed the economy contracted unexpectedly in the first quarter as strong consumer and business spending was offset by a ballooning trade deficit, slower inventory build and a fall in public expenditure.

Gross domestic product contracted 1.4% year on year in the three months to March 31, down markedly from the 6.9% increase posted in the final quarter of 2021.

It was the first weakening of the economy since mid-2020 at the height of the Covid-19 pandemic and lockdowns.

"Two consecutive quarters of negative growth defines a technical recession. Keep in mind, the Russian invasion happened more than halfway through the first quarter, so if the first three months saw a negative reading, it does not bode well for the second quarter," said David Madden, analyst at Equiti Capital.

"Despite the pull back, the US dollar is still up 0.5% on the day, which speaks volumes about the strength of the currency. In light of the -1.4% growth report, the Fed might look to rein in its hawkish commentary because negative growth and higher borrowing costs is not a good combination."

In Sweden, the central bank raised a key interest rate from zero to 0.25%, citing the highest inflation level since the 1990s.

The Riksbank said there had been "unusually large fluctuations in inflation in Sweden" and the rise last year "was largely due to rapid increases in energy prices." The Consumer Price Index for March was at 6.1%.

"Since the turn of the year, inflation excluding energy has also risen rapidly and has been significantly higher than the Riksbank's forecast in February," the central bank said in a statement. "The outcomes indicate that the upturn is now broad and prices of goods and food as well as services are rising unusually quickly."

In a results-heavy day, shares in banking software specialist Temenos soared on reports that tech-focused private equity firm Thoma Bravo had approached it over a possible takeover.

Asia-focused bank Standard Chartered jumped as it beat quarterly earnings forecasts, while Spain's Banco Sabadell was also higher on positive earnings.

Evolution Gaming shares were higher as first-quarter revenue rose 38%.

German online takeaway food company Delivery Hero fell despite saying it was on track for a positive adjusted core profit this year.

UK supermarket group Sainsbury fell after warning of lower profits as higher inflation and a cost of living crisis would hit consumer spending.

Inchcape shares were up as the car dealer reported a strong start to the year, as strong demand continued to outpace supply.

Latin America focused telecoms firm Millicom International Cellular shares fell as the company unveiled a fall in first-quarter earnings.

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