European shares ended Wednesday's sessions little changed as investors positioned themselves ahead of a key European Central Bank meeting on Thursday, mindful of how a gauge of long-term inflation expectations is currently at a decade high.
The pan-European Stoxx ended the session down 0.01 per cent, with retail stocks and defensives such as property sliding between 0.2 per cent and 0.6 per cent, while oil and mining shares rose.
"When investors see high inflation figures they look to put money into companies that thrive in an inflationary environment, such as miners," said Danni Hewson, financial analyst at AJ Bell.
A gauge of long-term euro-zone inflation expectations – which shows where markets expect 2032 inflation forecasts to be in 2027 – rose above 2.4 per cent on Wednesday, scaling a 10-year peak and far above the ECB’s 2 per cent target, according to data from the central bank, which is due for a policy meeting on Thursday.
The Iseq index dipped 0.1 per cent to 7,115.67, with Kerry Group standing out as a particularly weak spot among larger companies, as sector followers fretted about the impact of inflation on food groups. Kerry lost 2.8 per cent to €99.20.
Banks were mixed, with AIB losing 1.5 per cent to €1.92, while Bank of Ireland advanced 1 per cent to €6.08.
Ryanair lost 0.2 to €14.54, failing to join in a wider industry rally on the back of a strong trading update from US carrier Delta, given that there is no overlap between their businesses. Dalata Hotel Group was in demand, however, rising 2.3 per cent to €3.96.
UK midcaps slipped on Wednesday after data showed annual inflation last month rose to a three-decade high, intensifying a cost-of-living squeeze faced by households.
Tesco fell 2 per cent after the UK's biggest retailer warned of a drop in profits this financial year due to the tough economic conditions and pressure on consumers. Shares of rivals Sainsbury's, Marks and Spencer and Ocado Group slipped by between 2.1 and 2.6 per cent.
However, oil major Shell and miners Glencore and Anglo American rose between 0.7 per cent and 1.2 per cent.
Oil prices rose as investors grew more discouraged about peace talks between Russia and Ukraine, feeding worries about tight supplies even after US crude stocks rose by more than nine million barrels in the most recent week.
European stocks were lacking direction with the ECB meeting likely to set the tone for the weeks to come, said Raffi Boyadjian, lead investment analyst at brokerage XM.
"The ECB will decide whether to provide a timeline on when interest rates will begin to rise amid soaring prices, but even if it adopts a somewhat more hawkish stance than anticipated, it will not be able to match the Fed's rhetoric," he said, referring to the US Federal Reserve.
While no major policy action is expected from the ECB on Thursday, money markets are pricing in about 0.7 percentage points of tightening by December.
Paris-listed energy group EDF advanced 2.4 per cent after a report stated France is considering restructuring plans for the debt-laden power firm that include full nationalisation followed by the sale of its renewables business.
Telecom Italia gained 3.0 per cent after reports that French telecoms group Iliad is interested in making an offer the group's domestic consumer service business.
US shares were ahead in early afternoon trading as a rebound in growth stocks and strong results from Delta Air Lines offset declines in JP Morgan after the bank reported a slump in first-quarter profit in a mixed start to the earnings season.
Megacaps Apple and Microsoft rose, while chipmakers Nvidia Corp and Advanced Micro Devices recovered some of the ground they lost earlier in the week.
Delta Air Lines posting a smaller-than-expected quarterly loss and is forecasting a return to profit in the current quarter on the back of booming travel demand.
Other airlines such as American Airlines Group, United Airlines Holdings and Southwest Airlines also marched higher. – Additional reporting: Reuters