Europe midday: Shares up but Red Sea attacks weigh on sentiment

(Sharecast News) - European stock markets were higher on Tuesday, following a positive session on Wall Street and an unchanged final eurozone inflation reading for November, while attacks on shipping in the Red Sea tempered sentiment. The pan-European Stoxx 600 index was up 0.29% at 476.68. Eurozone CPI was confirmed at an annual rate of 2.4%, a fall of 0.5% month on month. The European Central Bank kept interest rates unchanged last week, boosting hopes that it might start cutting next year, but central bankers have been pouring cold water on the idea in recent days.

In Asia, the Bank of Japan kept interest rates at -0.1% and stuck to its yield curve policy, with the Japanese yen coming under pressure against the US dollar as a result.

"News the Bank of Japan is sticking with negative interest rates saw the yen fall and provided a boost to the export-heavy Nikkei 225," said AJ bell investment director Russ Mould.

"Still, it feels like the party which started last Wednesday when the Federal Reserve signalled potential rate cuts in 2024 has fizzled out - as the central bank has looked to put a lid on market hopes for an easing in monetary policy.

"Tomorrow's UK CPI reading should set the tone for rate expectations in the UK going into next year - anything below the forecast 4.3% could be supportive to UK stocks but a number above that level could trip them up as we head for the end of the year."

Shares in oil majors Shell and BP fell as shipping through the Red Sea was suspended following recent attacks on vessels in the Suez and Red Sea region by Yemeni Houthi rebels. Investors fear the attacks could lead to higher oil prices as supply is constrained or vessels have to take longer and safer routes to deliver goods.

Shipping giant Maersk was also down on the news, although losses were tempered by news that the US had formed a coalition with nine countries to start naval patrols in the area.

"Events in the Red Sea, where companies like Maersk and BP are diverting vessels thanks to a series of attacks, are a reminder of the impact of the ongoing conflict in the Middle East and may well act as a renewed inflationary pressure - as a disrupted supply chain leads to a higher cost of goods," Mould said.

Reporting by Frank Prenesti for Sharecast.com