European bourses have tumbled from record highs hit earlier this month as rising yields, inflationary pressures and COVID-19 cases pile pressure on equities.
The European Central Bank (ECB) does not see eurozone inflation above its two percent target in the medium term, chief economist Philip Lane said in an interview, even as inflation across the bloc rose to five percent in December.
But the incoming Bundesbank President Joachim Nagel warned on Tuesday that inflation could remain high for longer than the ECB expects.
He said: “The medium-term price outlook is exceptionally uncertain.
“I currently see a greater risk that the inflation rate could remain high for longer than currently expected.
“In any case, monetary policy must be on guard.”
He added: “The people in Germany rightly expect the Bundesbank to be an audible voice of the stability culture.
“I can assure you: it will stay that way. We will confidently bring our expertise and convictions into the debates.”
He also pledged to play a constructive role on the ECB’s Governing Council.
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The upcoming fourth-quarter earnings season is expected to strike a positive note for stock markets.
Germany’s Delivery Hero SE jumped 5.0 percent after saying it expects its food delivery business to break even during the second half of 2022 on-demand that has soared since the pandemic began.
Greg Marcus, managing director, UBS Private Wealth Management said: “Regardless of the volatility seen in markets so far this year, corporate fundamentals are strong and we are expecting double-digit earnings growth this year, which should bode well for stock prices in 2022.”
Profit for companies listed on the STOXX 600 is expected to jump 49.3 percent in the fourth quarter to 109.1 billion euros (£90.8billion) from a year earlier, Refinitiv data showed.
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Among other stocks, Italy’s second-largest bank, UniCredit, fell 1.1 percent after reports that it was interested in bidding for Russia’s Otkritie Bank.
HelloFresh gained 1.0 percent after the German meal-kit delivery firm announced a share buyback of up to 250 million euros (£208million).
Construction chemicals maker Sika AG climbed 2.9 percent after reporting a 17.3 percent rise in 2021 sales, boosted by acquisitions and an upturn in the building industry.
Meanwhile, Deutsche Bank slipped 0.5 percent after US financial investor Cerberus, which has favoured a merger of the bank and Commerzbank, divested a large chunk of its holdings in the top two German lenders.