European shares hover at 9-month highs as retailers jump, U.S. inflation moderates

By Bansari Mayur Kamdar and Shreyashi Sanyal

(Reuters) -European shares ended higher on Thursday, with retailers leading sectoral gains, while U.S. inflation data showed signs of moderating last month, easing worries about the Federal Reserve delivering big interest rate hikes in the near term.

The STOXX 600 rose 0.6%, closing out at its highest level since late April, with the European retail sector jumping 1.9%.

Most British retailers led the advance after earnings from major companies showed shoppers spent freely at Christmas, enjoying their first holiday season free of COVID-19 restrictions for three years. But retailers warned most would tighten their belts in 2023.

ASOS jumped 20.9% after the online fashion retailer said operational changes would help it deliver a 300 million pound benefit to its current financial year, giving the group a much-needed lift after sales fell over Christmas.

British retailer Tesco edged 0.9% higher on keeping its full-year profit guidance unchanged after it joined retail rivals in reporting stronger-than-expected Christmas sales.

Adding to the positive move, data showed U.S consumer prices fell for the first time in more than 2-1/2 years in December, offering hope that inflation was now on a sustained downward trend, though the labour market remains tight.

"A positive sign for the Fed as it narrows in on its target of widespread price stability," said Peter Essele, head of portfolio management at Commonwealth Financial Network in Waltham, Massachusetts.

"Investors will most likely be cheering the news in subsequent trading sessions as today's release, coupled with Friday's slowdown in wage growth, point to a Fed mandate that appears to be meeting its mark."

The rate-sensitive tech sector rose 0.4%, supported by a rise in semiconductor stocks such as ASML Holding after Taiwanese chipmaker TSMC reported a forecast-beating 78% rise in quarterly profit.

Logitech International dropped 16.9%, after it posted lower earnings and sales between October and December, and cut its sales outlook.

Shares in Ubisoft fell 14.0% after the French video game maker warned of lower-than-expected full-year revenue and postponed the release of its game "Skull and Bones", prompting some analysts to cut their estimates and price targets.

"The expectation is that tech is going to be hit harder," said Danni Hewson, financial analyst at AJ Bell. "Unless it is a massive shock to the market, it is just not breaking through."

(Reporting by Bansari Mayur Kamdar and Shreyashi Sanyal in Bengaluru; editing by Uttaresh.V, Shinjini Ganguli and Alex Richardson)