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European stocks edge higher; euro zone PPI data in focus

By Peter Nurse - European stock markets edged higher Tuesday, with investors remaining confident despite concerns surrounding higher oil prices and slowing manufacturing activity data.

At 03:40 ET (07:40 GMT), the DAX index in Germany traded 0.1% higher, the CAC 40 in France climbed 0.1%, and the FTSE 100 in the U.K. rose 0.2%.

European equities posted healthy gains over the course of the first three months of the year, and investors have remained pretty buoyant at the start of the new quarter despite the shock of a sharp rise in oil prices after a group of leading producers decided to cut output levels.

Crude prices have continued to trade higher Tuesday, in the wake of the surprise production cut by the Organization of Petroleum Exporting Countries and allies, known as OPEC+.

By 03:40 ET, U.S. crude futures traded 1% higher at $81.22 a barrel, while the Brent contract climbed 0.9% to $85.69.

While higher oil prices will likely worry central banks already fretting about elevated inflation levels, fears of a global economic slowdown grew this week after data showed that manufacturing activity in the U.S., the euro zone, and the U.K. remained in contraction through March.

The Reserve Bank of Australia decided to halt its year-long rate hiking campaign earlier Tuesday, and investors are growing confident the Federal Reserve is getting very close to doing something similar, with the markets for short-term interest rate futures indicating expectations that the next Fed hike will be the last.

The European Central Bank is on a slightly different path having increased interest rates by 50 basis points last month, and signaled further hikes ahead with President Christine Lagarde stating last week that underlying inflation remains “significantly too high”.

How much further the ECB goes is likely to be data dependent, and German exports posted their biggest monthly rise since June in February, according to data released earlier Tuesday, adding to evidence that the euro zone's largest economy may avoid recession in the first quarter of the year.

All eyes will now turn to the euro zone PPI release for February later in the session. This is expected to show a fall of 0.3% on the month, with the annual growth rate dropping to 13.3% from 15.0% the prior month.

In the corporate sector, L’Oréal (EPA:OREP) stock rose 0.3% after the French beauty giant agreed to buy Australian skincare brand Aesop in a deal worth $2.5 billion after months of negotiations.

Additionally, gold futures fell 0.2% to $1,997.25/oz, while EUR/USD traded 0.2% higher at 1.0916.

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