Europe stocks, euro rise on elevated eurozone inflation

European Central Bank president Christine Lagarde has expressed scepticism that inflation has peaked. ©AFP

London (AFP) - European equities and the euro rose Wednesday as eurozone inflation slowed but remained elevated on high energy costs.

Markets were also buoyed by hopes that China will further ease its strict Covid containment measures following widespread protests, though gains were tempered by leaders' warnings of a crackdown on dissent.

Traders were awaiting a key speech by Federal Reserve chief Jerome Powell, with many expecting him to outline plans for future interest rate hikes to tackle high US consumer prices.

Eurozone inflation eased to 10 percent in November, the first drop in 17 months but holding in double figures, the EU statistics agency said.

Focus on rising rates

European Central Bank president Christine Lagarde has expressed scepticism that inflation has peaked.

"The ECB is still increasing (interest) rates and this is what traders are focused on," AvaTrade analyst Naeem Aslam told AFP, in reference to market reaction following the data.

Inflation in the bloc had hit a record 10.6 percent in October, boosted also by soaring energy and food bills in the wake of Russia's war in Ukraine.

"Euro area inflation figures surprised on the downside, providing an early indication that the record price pressures seen in recent months may have peaked," added CEBR economist Karl Thompson.

However, he warned that "inflation is nonetheless likely to remain elevated throughout 2023" and forecast rising rates next month.

Global central banks, including the Fed, have ramped up borrowing costs this year in a bid to dampen red-hot inflation that was fuelled also as economies reopened from the pandemic.

Meanwhile on Wednesday, Asian stocks mostly rebounded as investors looked past weekend demonstrations in China after officials announced moves aimed at softening the zero-Covid strategy.

But in a sign that the leadership was determined to maintain its authority, the country's top security body called for a "crackdown" against "hostile forces".

Data showing China's factory activity shrank further in November underscored the impact the zero-Covid approach has had on the world's second-biggest economy.