(Sharecast News) - European equities turned marginally lower by the close on Wednesday as investors positioned ahead of the final round of central bank rate decisions of the year.
The pan-European Stoxx 600 slipped 0.002% to 579.79, with losses across the continent offset by strength in London.
Germany's DAX fell 0.48% to 23,960.59 and France's CAC 40 eased 0.25% to 8,086.05, while the UK's FTSE 100 outperformed, rising 0.92% to 9,774.32.
AJ Bell's head of markets Dan Coatsworth said that "a lower-than-expected reading of inflation has reinforced expectations for a Bank of England rate cut tomorrow and helped the FTSE 100 to post solid gains on Wednesday morning," noting that the inflation data also weighed on sterling, which "helps flatter the dominant overseas earnings in the UK's flagship index".
Focus remained firmly on monetary policy, with the European Central Bank set to conclude its final meeting of the year on Thursday and widely expected to keep interest rates unchanged at 2%.
ECB president Christine Lagarde said the bank was likely to lift its eurozone growth forecasts again, after raising its 2025 GDP projection to 1.2% in September.
Sweden's Riksbank and Norway's Norges Bank are also due to announce their final policy decisions for 2025 this week.
Patrick Munnelly, market strategy partner at TickMill, said that broader financial markets appeared "directionless" as attention shifted to "upcoming interest rate decisions from the Bank of England, the European Central Bank, and the Bank of Japan later this week, alongside key US inflation data".
Inflation broadly stable in eurozone
Economic data in the euro area showed inflation pressures remained broadly stable.
Eurozone inflation was unchanged at 2.1% in November, according to Eurostat, slightly below expectations for a rise to 2.2%.
Inflation across the wider EU eased to 2.4% from 2.5% in October.
Services were the largest contributor to eurozone inflation, adding 1.58 percentage points, followed by food, alcohol and tobacco, and non-energy industrial goods.
Core inflation, the ECB's preferred gauge, was unchanged at 2.4%.
Among major economies, Germany's harmonised inflation rate rose to 2.6% from 2.3%, Spain's held steady at 3.2%, France's was unchanged at 0.8%, and Italy's eased to 1.1% from 1.3%.
In Germany, business sentiment weakened unexpectedly in December.
The Ifo business climate index fell to 87.6 from 88.0, missing forecasts of 88.2, as expectations deteriorated despite an unchanged assessment of current conditions.
Manufacturing sentiment slipped further into negative territory, while services and trade also weakened.
Ifo president Clemens Fuest said the year was ending "without any sense of optimism".
ING's global head of macro, Carsten Brzeski, said the data was consistent with Germany ending the year with "yet another growthless quarter", though he added there was evidence the economy could move out of stagnation next year, cautioning that any rebound would not amount to a structural improvement.
In the UK, inflation data strengthened expectations for further monetary easing.
Consumer price inflation slowed more than expected to 3.2% in November from 3.6%, the lowest level in eight months and well below the 3.5% consensus forecast.
Core inflation fell to 3.2% from 3.4%, while CPIH eased to 3.5% from 3.8%.
The Office for National Statistics said food and non-alcoholic beverages made the largest downward contribution, with inflation in the category easing to 4.2% from 4.9%.
ONS chief economist Grant Fitzner said factory-gate price pressures had slowed, driven by lower food inflation.
Coatsworth said the implications for rates were evident across UK equities, noting that "housebuilders posted solid gains on the implied implications for rates, which should help support demand if mortgages become more affordable".
UK data also showed a softer housing market and tentative improvement in manufacturing.
Average house prices dipped 0.1% month-on-month in October and were up 1.7% year-on-year at 270,000, with London underperforming sharply as prices fell 1.9% to 547,000.
The downturn in manufacturing eased in December, with the CBI reporting a slower pace of decline in output and some improvement in order books, although demand remained weak and costs elevated.
Elsewhere, oil prices steadied after recent volatility, with Coatsworth noting that "BP and Shell recovered some ground as oil prices steadied following a sell-off yesterday on rising hopes for a resolution to the conflict in Ukraine and the implications that might have for global energy markets".
Munnelly added that crude had surged earlier in the session after US president Donald Trump announced a "total and complete" blockade on sanctioned oil tankers entering or leaving Venezuela, a move that has "heightened geopolitical tensions amid ongoing concerns about global oil demand".
Serco jumps on guidance lift, Diageo slides
Among individual stocks, shares in UK outsourcer Serco jumped 6.66% after the company raised its guidance for 2025, citing contract wins.
Coatsworth said the update had "sparked enthusiasm", adding that defence-sector awards were supporting "better-than-expected profit in 2025 and a robust outlook for 2026", while healthy cash flow was underpinning a strong balance sheet.
Diageo slipped 0.18% after the drinks group agreed to sell its 65% stake in East African Breweries to Japan's Asahi Holdings for around $2.3bn.
Reporting by Josh White for Sharecast.com.
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