(Bloomberg) -- European stocks were flat as investors awaited key US inflation data on Wednesday for clues on the Federal Reserve's policy outlook. Smurfit Kappa Group Plc fell sharply after it agreed to combine with rival packaging company WestRock Co. in an $11.2 billion deal.
The Stoxx 600 Index was broadly unchanged as of 14:40 p.m. in London. Defensive sectors including retail and telecoms outperformed cyclicals such as technology and chemicals. Oddo strategists continue to prefer defensive stocks to cyclicals as a slowdown is underway. Still, they turned more positive on US stocks over European counterparts.
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Among individual stocks, SAP SE was the biggest drag in terms of index points, after Oracle Corp. reported a slowdown in cloud sales growth, dimming enthusiasm about the sector. Watches of Switzerland Group Plc rose after it was raised to a buy recommendation at Goldman Sachs Group Inc.
Meanwhile, OPEC data showed global oil markets face a supply shortfall of more than 3 million barrels a day next quarter — potentially the biggest deficit in more than a decade — as Saudi Arabia extended its production cuts. Oil advanced to a 10-month high in London as global fuel markets continued to tighten.
In the UK, wage growth held at a record high in the three months through July, a sign of persistent inflation that is keeping pressure on the Bank of England to raise interest rates again.
“Investors will already be looking ahead to tomorrow's US CPI report and as such may be reticent to deploy capital aggressively at this moment,” said James Athey, investment director at Abrdn.
Over in Germany, investor confidence in the economy improved for a second month, while lingering at a level that will do little to dispel intensifying concerns over the country's status as Europe's growth laggard.
SECTORS TO WATCH
- European IT and software stocks may be active on Tuesday as Oracle Corp. dropped in late trading after it reported cloud sales growth that slowed in the quarter, dimming enthusiasm about the sector.
- European chip stocks could be active following a Bloomberg report saying that Arm Holdings Ltd.'s initial public offering is oversubscribed by 10 times as bankers plan to stop taking orders by Tuesday afternoon.
For more on equity markets:
- Novo's Lofty Valuation Leaves No Room for Error: Taking Stock
- M&A Watch Europe: Hapag-Lloyd, Ithaca Energy, Shell, Renk Group
- Saudi Arabia's IPO Revival Meets Keen Investor Demand: ECM Watch
- US Stock Futures Little Changed; Acelyrin, Sight Sciences Fall
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