Europe close: Stocks gain despite higher-than-expected US inflation

(Sharecast News) - European stocks ended up on Wednesday as investors shrugged off a higher-than-expected US inflation reading that raised expectations of a rate hike by the Federal Reserve this month.

The pan-regional Stoxx 600 index closed up 0.4% at 637.75, Germany's DAX ended 0.2% higher at 25,298.61 and France's CAC 40 rose 0.6% at 7,873.11.

Data released earlier by the Bureau of Labor Statistics showed the US consumer price index ticked up 3.7% on the year in September, from 3.4% in August. This was above the 3.6% expected by economists. Core inflation - which excludes food and energy - rose to 2.6% year-on-year last month from 2.4% in August, also above expectations, of 2.5%.

Kathleen Brooks, research director at XTB, said: "The higher than expected inflation rate in the US for September has had a big impact on markets. Treasury yields have risen across the curve, US stocks are sharply lower and the chances of a Fed rate hike later this month have doubled in a week to 40%.

"The September CPI data was the fastest pace of increase since April, this has boosted US rate hike expectations, which is causing investors to rethink the outlook for stocks and earnings."

In equity news, Softcat shares slumped after results, while Danish energy firm Orsted fell following a Bloomberg report that the US administration is looking at re-evaluating the permit for its wind farm near Rhode Island.

Sweden's SEB slid after the country's bank regulator temporarily raised the lender's capital requirements due to flaws in its internal risk models.