By Amruta Khandekar and Matteo Allievi
(Reuters) -European shares were muted on Thursday as hawkish signals from a slew of major central bankers offset a boost from H&M, after the Swedish retailer posted a stronger-than-expected quarterly profit.
The pan-European STOXX 600 index was broadly unchanged at 456.34 by 0829 GMT, paring some early gains.
The index had regained some ground on Wednesday as upbeat U.S. economic data eased some fears about a steep recession, though investors are on tenterhooks as central bankers remain hyper-focused on battling inflation.
U.S. Federal Reserve Chair Jerome Powell said most Fed policymakers expected they would need to raise interest rates at least twice more by 2023 end, while European Central Bank President Christine Lagarde during a closely-watched panel discussion in Portugal cemented expectations for a euro-zone rate hike in July.
“Markets have taken the view that central banks continue to be hawkish and believe they can hike rates as the economy can withstand it,” said Daniela Hathorn, senior market analyst at Capital.com.
“It shows disinflation is not a straight path and that’s what central bankers are concerned about.”
Shares of H&M climbed 10.8% to an over one-year high and topped Stockholm’s equity index after the world’s second-biggest fashion retailer beat expectations for second-quarter profit.
The move pushed Europe’s retail sector 1.1% higher.
Adding to recent hawkish messages from central banks globally, Sweden’s central bank raised its policy rate by a quarter percentage point as expected and forecast at least one more rate hike this year.
Renault advanced 6.6% after the French carmaker raised its full-year financial outlook following the success of its recent launches.
The stock was the top gainer on France’s blue-chip index, which rose 0.3% and also helped the automaker sub-index climb 1.3%.
Other bourses in Europe were mixed, with the UK’s FTSE 100 lagging peers, while Spain’s IBEX index was up 0.2%, after preliminary data showed that the country’s consumer prices rose 1.9% year-on-year in June, their slowest increase since March 2021.
That made Spain the first among the euro zone’s large economies to have inflation fall below 2%.
Investors are now awaiting consumer prices data from Germany and eurozone consumer confidence data expected later in the day.
Serco Group gained 11.0% after the British outsourcing company raised its full-year profit and revenue outlook.
Semiconductor firm Aixtron rose 2.5% after Citigroup initiated coverage on the stock with a “buy” rating.
(Reporting by Amruta Khandekar in Bengaluru and Matteo Allievi in Gdansk; Editing by Sherry Jacob-Phillips and Rashmi Aich)