Europe midday: Shares slip into red as inflation fears offset flash PMIs

(Sharecast News) - European shares slipped into the red by midday on Wednesday as fears over interest rate rises amid inflationary pressure overshadowed positive flash business survey readings in the eurozone and a weaker oil price drive by hopes talks between the US and Iran that could see the blockaded Strait of Hormuz re-open.

The pan-regional Stoxx 600 index was down 0.24% to 641 at 1036 GMT with all major bourses higher.

Brent crude was down 0.4% to $98.85 a barrel - still a long way from the $72 level before the US and Israel started their war of choice on Iran and Lebanon at the end of February.

Iran has reportedly been in negotiations with the US through a Qatari mediator in New York. Its conditions include a halt to what it calls US "acts of aggression," an end to the naval blockade and economic warfare, and the release of Iranian assets, Iranian foreign ministry spokesman Esmaeil Baghaei said.

Iranian President Masoud Pezeshkian is scheduled to address the UN General Assembly later today amid speculation that he might hold talks with US President Donald Trump.

The American leader on Tuesday told world leaders talks were making progress, but in the same speech also threatened to "annihilate" Iran.

Sentiment was also boosted by reports that Saudi Arabia had made better-than-expected progress in repairing its east-west pipeline to the Red Sea damaged by Iran-backed Houthi rebels last week.

Meanwhile, private sector activity across the eurozone expanded at its fastest pace in almost three-and-a-half years in September, according to preliminary survey data released on Wednesday.

The HCOB flash eurozone composite purchasing managers' index, compiled by S&P Global, rose to 53.1 from 52.0 in August, its highest reading since April 2023. A reading above 50.0 indicates expansion.

Growth strengthened across both manufacturing and services. The services business activity index climbed to a 10-month high of 53.0 from 51.6, while the headline manufacturing PMI was unchanged at 52.7 - though the manufacturing output index edged up to 53.4 from 53.3, reaching a 55-month high.

Growth was broad-based, S&P Global said, with Germany recording its strongest expansion in almost a year and France returning to growth for the first time in 10 months.

However, inflationary pressures picked up, with input costs and selling prices rising at their fastest rates in four months.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey was consistent with quarterly GDP growth of around 0.4%. He added that the economy's resilience amid geopolitical and inflationary pressures would "likely embolden the ECB to hike interest rates again before the end of the year".

In equity news, shares in Arcadis slumped after Canada's WSP Global dropped its $5bn takeover bid for the Dutch engineering consultancy.

Reporting by Frank Prenesti for Sharecast.com