Europe close: Stocks fall back after hotter-than-expected US CPI data

(Sharecast News) - European stocks retreated on Tuesday after the latest US inflation data led traders to price in fewer interest rate cuts in the States for over 2024. The pan-European Stoxx 600 index was down 0.95% at 482.83, alongside a 0.92% drop for the German Dax to 16,880.83.

Spain's Ibex 35 meanwhile fell 0.59% to 9,925.40.

The euro and two-year German Bunds slipped on the news, while in parallel front-date Brent futures gained.

"January consumer price inflation falling less than expected was enough of a catalyst to cut the equity rally short, push yields and the US dollar to two-month highs," said Axel Rudolph, senior market analyst at IG.

"Hopes for a Fed March rate cut have all but disappeared with the market now pricing in a 53% probability of a first cut being seen in June."

Following the January US CPI report, Fed funds futures were left pricing in just three interest rate cuts by the end of the year.

In Germany,economic sentiment strengthened in February, a closely-watched survey showed on Tuesday, despite the country's economy continuing to struggle.

The latest ZEW indicator of economic sentiment improved 4.7 points in February to 19.9, the seventh consecutive month of increases.

This was despite the indicator of the current economic situation shedding 4.4 points to -81.7, the lowest since June 2020, at the start of the pandemic.

In equity news, German travel giant Tui surged after posting a quarterly operating profit of €6m on the back of upbeat travel demand, smashing estimates of €102m