European shares dented by euro zone inflation data

Source : REUTERS
Last Updated: Fri, Feb 28, 2014 11:24 hrs
A huge Euro logo is pictured past the headquarters of the European Central Bank (ECB) in Frankfurt

European shares dipped on Friday as euro zone inflation data came in above expectations, which investors said could lessen the prospect of new monetary stimulus measures from the European Central Bank.

The pan-European FTSEurofirst 300 index, which had been in positive territory before the publication of the data, fell 0.2 percent to 1,342.49 points.

The euro zone's blue-chip Euro STOXX 50 index also declined by 0.2 percent to 3,127.58 points.

Some analysts have been banking on the European Central Bank loosening its monetary policy further in order to strengthen the region's fragile economic recovery, which could in turn drive up European stock markets.

This scenario had been based around the likelihood of a low reading of February euro zone inflation, but that data on Friday came in at a higher than expected 0.8 percent.

"There could be some disappointment on the basis that the ECB could step back from any action that it could have been considering next week to see how things pan out," said Hargreaves Lansdown equity analyst Keith Bowman.


Bowman and other traders also pointed to ongoing signs of conflict in Ukraine as a further weight on European equities.

On Friday, armed men took control of two airports in the Crimea region in what Ukraine's government described as an invasion and occupation by Russian forces, raising tension between Moscow and the West.

Austrian bank Erste Group slumped by around 8 percent after halving its dividend. It also said it had an exposure of 435 million euros ($595.15 million) to Ukraine.

"Ukraine is a political risk. As long as the markets are convinced that Russia is not going to take a hard stance on the issue, it is something to watch but not a game-changer," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

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