European shares flat as consumer staples firms cap losses

European shares were flat on Tuesday as declines in energy and tech stocks were countered by gains in consumer staples firms, with investors wary about prospects of the Federal Reserve sticking to its aggressive rate hike stance. The region-wide STOXX 600 index was down 0.03% at 0852 GMT.

European shares were flat on Tuesday as declines in energy and tech stocks were countered by gains in consumer staples firms, with investors wary about prospects of the Federal Reserve sticking to its aggressive rate hike stance.

The region-wide STOXX 600 index was down 0.03% at 0852 GMT. The index had posted declines for the previous two sessions, as optimism around China easing its COVID-19 restrictions was overshadowed by worries around interest rates and the likelihood of a recession. The index has rallied off its October lows on hopes that signs of cooling inflation would allow the Fed to slow the pace of its rapid interest rate increases.

However, those hopes were dented on Monday after a report showed an unexpected pick up in U.S. services industry activity in November, which, along with solid labour data last week, provided further evidence of economic resilience. "(The services data) slightly disturbed the narrative of a slowdown or pivot," said Russ Mould, investment director at AJ Bell.

"It's almost painting a slightly stagflation picture of slowing or weak growth, but still sticky inflation." The European Central Bank will have to raise rates several more times to tame price pressures, even if headline inflation is now close to its peak, ECB chief economist Philip Lane told the Milano Finanza.

Energy stocks led the declines, falling nearly 1%, while tech stocks slid 0.3%. However, gains in consumer staples stocks such as Nestle and Unilever helped cap losses on the STOXX 600. Among individual stocks, shares of Aeroports de Paris (ADP) tumbled 12% after Royal Schiphol Group sold its remaining stake in the French airports company at a sharp discount to ADP's recent share price.

Orsted gained 2.6% after the renewable energy firm said it intends to invest in a large-scale facility in Denmark to produce green hydrogen.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)