By Sudeshna Ghoshal
Sept 10 (Reuters) – European shares were subdued on Thursday after their biggest selloff in two months, as investors awaited an expected interest rate hike from the European Central Bank and comments from President Christine Lagarde on oil prices and inflation.
The pan-European STOXX 600 was flat at 639.79 points, as of 0838 GMT, with most regional markets trading in tight ranges.
European stocks tumbled 1.4% on Wednesday after Brent crude surged above $100 a barrel for the first time since July, stoking inflation concerns and reinforcing expectations that central banks may need to keep monetary policy restrictive for longer.
The ECB is expected to deliver a 25-basis-point rate hike to 2.5%, when it announces its policy decision at 1215 GMT and signal that it is ready to tighten further if the inflation outlook does not improve. Financial markets are pricing in one more rate hike later this year, followed by another one or two moves next year.
“It’s going to be the outlook that will be watched closely, whether this will follow a wait-and-see stance or whether there could be another hike,” said Susannah Streeter, chief investment strategist at Wealth Club in London.
Lagarde is expected to hold a press conference at 1245 GMT.
Oil prices eased on Thursday but Brent crude remained above $100 a barrel as traders braced for deeper supply disruptions after Iran and the United States launched their largest wave of attacks on shipping since their six-month-old conflict began. [O/R]
Shares of the European Energy sector gained 0.3% as oil prices remained elevated.
Separately, data showed German inflation accelerated to 2.9% in August, in line with economists’ forecasts in a Reuters poll.
U.S. INFLATION DATA IN FOCUS
U.S. producer prices data for August is due later in the day and consumer prices report is scheduled for Friday. Analysts and traders expect the data to play a key role in whether the Federal Reserve hikes interest rates next week.
Traders are pricing in a 62% chance of a 25-basis-point hike by the U.S. Federal Reserve at its September 15-16 meeting, according to CMEGroup’s Fedwatch tool.
Among individual stocks, Associated British Foods tumbled 10% and was poised for its biggest one-day percentage decline since January following lacklustre sales at its budget fashion group Primark.
D’Ieteren was the top gainer in STOXX 600, rising nearly 5%, after the Belgian holding group reported higher half-year profit and announced a new CEO.
(Reporting by Sudeshna Ghoshal in Bengaluru; Editing by Sherry Jacob-Phillips)
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