European shares muted ahead of eurozone, U.S. inflation report

European shares were broadly flat on Friday, the last trading session of a turbulent March, as waning fears of a banking crisis allowed investors to focus on U.S. and eurozone inflation reports for fresh cues on global interest rate moves. The pan-European STOXX 600 index was headed for a second-straight quarterly gain, but on track to end March slightly lower.

European shares were broadly flat on Friday, the last trading session of a turbulent March, as waning fears of a banking crisis allowed investors to focus on U.S. and eurozone inflation reports for fresh cues on global interest rate moves.

The pan-European STOXX 600 index was headed for a second-straight quarterly gain, but on track to end March slightly lower. Retail shares continued to maintain momentum, adding 0.7%, while real estate and tech shares lost 0.6% and 0.5%, respectively.

Banks fell 1.0% - with Swedbank down 5.9% - the sector set for its worst monthly performance since March 2020, as the collapse of two mid-sized U.S. lenders and the takeover of Credit Suisse fuelled worries about stress in the sector. While a slew of measures to support the sector and a rally in technology stocks have pushed the STOXX 600 to three-week highs, investors have not completely shaken off fears of risks in the future.

"What lies ahead is tricky. Our forecasts for economic growth and interest rates are largely sideways. We don't expect rate cuts by the Federal Reserve or the ECB this year," said Willem Sels, Global CIO, Private Banking & Wealth Management, HSBC. The market will have to reassess its dovish reaction as inflation, especially core inflation, was coming down "agonizingly slowly," he added.

Investors will closely monitor flash estimates of euro zone inflation data, which is expected to show a moderation in consumer price growth in March on a yearly basis. In a separate report, German retail sales fell unexpectedly in February by 1.3% in real terms compared to the previous month, data showed on Friday.

U.S. Labor Department will also release its Personal Consumption Expenditure (PCE) report, due at 8:30 a.m. ET (1230 GMT), expected to show consumer prices, excluding volatile food and fuel prices, remained unchanged in February from a month ago. Among individual stocks, Swiss engineering company ABB edged up 0.6% as it said it will launch its new $1 billion share buyback on April 3 with the intention to buy up to 30 million of its shares.

H&M rose 2.3%, a top gainer on the broader index. Shares of Rolls-Royce were up 0.5% after its new boss Tufan Erginbilgic sought to make his mark on the British engineering company, hiring Helen McCabe from BP as chief financial officer.

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