European shares fall ahead of US data; earnings in focus

European shares fell on Tuesday as investors turned cautious ahead of U.S. consumer price data that is crucial to determine the Federal Reserve's interest rate trajectory, and also assessed corporate earnings updates. The pan-European STOXX 600 index retreated 0.3% from a two-year high, with rate-sensitive technology shares hitting a one-week low after a 1.9% drop.

European shares fell on Tuesday as investors turned cautious ahead of U.S. consumer price data that is crucial to determine the Federal Reserve's interest rate trajectory, and also assessed corporate earnings updates.

The pan-European STOXX 600 index retreated 0.3% from a two-year high, with rate-sensitive technology shares hitting a one-week low after a 1.9% drop. German shares lagged regional peers and fell 0.6%

All eyes will be on the U.S. consumer price index (CPI) for January, due at 1330 GMT. Economists polled by Reuters expect year-over-year headline CPI to shed a welcome 50 basis points (bps) to 2.9%, bringing it within one percentage point of the Fed's 2% target. ZEW economic sentiment survey for Germany and the euro zone is due at 1000 GMT.

"A lot of the volatility in the market remains in trying to price in how many rate cuts do we have by year-end. That's not going to change regardless of what the data says today. On rate cuts, it's pretty much a given now that we are going to see the start of cutting rates this year," said Daniela Hathorn, senior market analyst at Capital.com. "It's just the case of the magnitude, or how often are we going to see them. If we were to see a higher than expected reading, I think we could see the dollar once again pushing higher."

The odds for at least a 25 bps rate reduction by the Fed in May have dropped to 56%, from over 95% at the start of 2024, as per the CME FedWatch Tool. Investors will also closely monitor comments from European Central Bank board member Anneli Tuominen for any clues on the bank's rate path.

Among earnings candidates, shares of Michelin advanced 5.6% to the top of STOXX 600 after the tyre maker reported record results, citing the delayed positive impact of its 2022 price adjustments. TUI climbed 4.1% as Europe's largest travel operator reported better-than-expected numbers in the first quarter after it swung to a profit on the back of robust demand.

thyssenkrupp nucera rose 0.9% after the German hydrogen company's first-quarter sales rose by more than a third, citing rising demand for its electrolyser technology. Randstad edged 0.7% higher after the Dutch recruiter's fourth-quarter core earnings met market expectations as solid margin and cash generation offset a revenue drop.

Meanwhile, shares of BE Semiconductor slipped 3.7%, ASML was down 3%, while Aixtron fell 2.7% after peer Siltronic said it expects its EBIT to decline "significantly" in 2024.

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