- UK inflation fall to BoE target
- French harmonised CPI undershoots
- Eurozone industrial output rises
- ECB's Nowotny expects Eurozone growth
- US retail sales out later
FTSE 100: -0.24%
CAC 40: -0.51%
FTSE MIB: -0.42%
IBEX 35: -0.45%
Stoxx 600: -0.44%
European stocks declined as UK inflation fell to the Bank of England's (BoE) target of two per cent while French inflation rose.
The UK's consumer price index dropped to 2% in December from 2.1% the prior month, surprising analysts who had expected it to hold steady.
The drop, driven by food and drink prices, will ease pressure on the BoE to raise interest rates following the recent recovery in the economy.
"The fall in CPI inflation in December to the 2% target for the first time in four years shows that the economic recovery is not prompting price pressures to build," Capital Economics said. "Indeed, CPI inflation looks likely to spend more time below 2% than above it during 2014."
In contrast, French CPI rebounded last month, watering down concerns that a struggling economy could add to deflationary pressures. Prices rose by 0.3% in national CPI terms in December after measures were unchanged in November, the national statistics institute Insee revealed. The rise was driven by seasonal increases in air travel and vacation packages.
The harmonised measure of consumer prices, however, remained unchanged at an 0.8% rate of increase over the year, a tenth of a percentage point less than had been forecast.
Eurozone industrial output grows
Eurozone industrial production jumped 3% year-on-year in November, compared to an increase of 0.5% in October and the consensus for a 1.8% uptick.
Elsewhere in the bloc, European Central Bank (ECB) Governing Council member Ewald Nowotny said the Eurozone will grow stronger this year than had been expected.
The ECB predicts gross domestic product (GDP) to grow by 1.1% this year. Nowotny, who is also the head of Austria's central bank, said the outlook for Europe as a whole was now much better than it was a year ago.
"Maybe there is even potential on the upside (to our forecasts)," he said, according to Reuters.
"Maybe some countries like Germany, like Austria, might reach 2% growth. We are still cautious in that our prediction is a bit lower but that might be something to be expected."
US retail sales
A report on US retail sales is expected to show a gain of 0.1% month-on-month in December, following an increase of 0.7% in November.
"Many view retail sales as the best indicator for economic activity, particularly in a country like the US which relies heavily on consumer spending for growth," said Craig Erlam, Market Analyst at Alpari.
"With this is mind, a good number today could ease some of the concerns which arose following the poor jobs report on Friday and convince investors that the recovery is still on track."
He said a positive result could convince the Federal Reserve that the worse-than-expected US non-farm payroll figures on Friday was a glitch due to poor weather and could prompt another round of tapering at the end of this month.
The US central bank began unwinding monthly bond purchases by $10bn to $75bn last month.
Ashmore tumbled after the fund manager's assets under management fell 4.1% to $75.3bn in the three months ended December 31st.
Celesio declined after McKesson said it failed to receive enough backing from shareholders to buy the drug distributor.
Volkswagen edged lower after UBS cut its rating of the carmaker to 'sell' from 'neutral'.
Jeronimo Martins slumped after the Portuguese retailer reported a slowdown in sales growth in Poland, its biggest market.
The euro rose 0.07% to $1.3681.
Brent crude futures fell $0.047 to $106.700 per barrel, according to data on the ICE.