Europe's STOXX 600 falls at start of inflation data-driven week (updated)

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26/02/2024 10:18

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        * 
      Zealand Pharma shares surge on liver disease drug trial
data
    

        * 
      Bank of Ireland slides on weaker-than-expected forecast
    

        * 
      France's Iliad to take $1.3 bln stake in Sweden's Tele2
    

        * 
      STOXX off 0.4%
    

  
 (Updated at 1650 GMT)
    By Ankika Biswas and Khushi Singh
       Feb 26 (Reuters) - Europe's benchmark stock index
dropped on Monday, led by miners, with investors bracing for
crucial inflation reports throughout the week for further clues
on the timing of interest rate cuts by major central banks,
including the European Central Bank.
    The pan-European STOXX 600  .STOXX  closed 0.4% lower. So
far in 2024, it has gained 3.4%, even closing at an all-time
high on Friday, driven by stubborn expectations of early policy
easing and a resilient earnings season.
    The continent's top economy Germany's benchmark DAX  .GDAXI 
hit a fresh record intraday and closing high, boosted by a 2.8%
rise in defence firm Rheinmetall  RHMG.DE .
    However, the lack of a substantial AI-driven rally and
economic concerns have prompted the flagship STOXX 600 to lag
its U.S. peer S&P 500's  .SPX  6.7% jump during the same period.
    "At some point this rally is going to be overextended and
the fundamental sustainability will be questioned," said Daniela
Hathorn, senior market analyst at Capital.com.
    "Markets want to see the disinflation process continue.
There's greater weight on the ECB cutting rates before other
central banks like the Fed and the Bank of England." 
    A sustained downtrend in euro zone inflation, with data due
on Friday, could sharpen hopes of a near-term ECB rate cut and
fuel further gains in equities. Traders, however, expect rates
to remain steady at next week's March policy meeting. 
    ECB policymaker Yannis Stournaras noted the "optimal timing"
for the first cut might be the end of the first semester if
inflation continues to decelerate and wage data is supportive.
    The Federal Reserve's preferred inflation measure - the core
personal consumption expenditures price index, due Thursday -
will also be assessed as traders continue to scale back
expectations of U.S. policy easing.
    Basic resources  .SXPP  dropped 2.1% to a four-month low,
spearheading sectoral declines, while technology  .SX8P  rose
0.4%, led by a 6.5% jump in chipmaking parts supplier BE
Semiconductor Industries  BESI.AS .
    Zealand Pharma  ZELA.CO  leapt 35.7% after an experimental
drug it is developing with Boehringer Ingelheim yielded what
they described as "groundbreaking" mid-stage trial results in
the treatment of fatty liver.
    Sweden's Kinnevik  KINVb.ST  gained 5.4% on plans to sell
its entire stake in Tele2  TEL2b.ST  to French investor Xavier
Niel and his Iliad telecoms business. Tele2 shares were up 5.3%.
    Bank of Ireland  BIRG.I  slumped 10.6% after a
weaker-than-expected outlook from the country's biggest lender
eclipsed a more than tripling of shareholder returns on the back
of surging full year profits.
    HelloFresh  HFGG.DE  lost 11.8%, with UBS flagging risks for
the German meal-kit delivery firm's 2024 guidance ahead of
earnings in March.

 (Reporting by Khushi Singh and Ankika Biswas in Bengaluru;
Editing by Sherry Jacob-Phillips; Editing by Shounak Dasgupta
and Mark Potter)
 ((Khushi.Singh@thomsonreuters.com))