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European Shares Flat ahead of Inflation Data; Heineken Drags

  • Brewer Heineken slides after profit warning
  • EZ banks edge up after stress test results
  • Euro area inflation seen easing in July

July 31 (Reuters) - European shares were broadly flat on Monday ahead of data that is expected to show euro zone inflation eased in July, likely supporting the view that the European Central Bank will hold off from hiking interest rates again next month.

The pan-European STOXX 600 struggled for direction, pulling back from near 1-1/2-year highs touched last week.

Dragging the index down, Heineken slid 4.8% after the world's second-largest brewer by volume cut its 2023 profit growth forecast after an economic slowdown in Vietnam depressed first-half earnings by more than expected.

Other spirits makers Diageo and Anheuser-Busch Inbev fell about a percent each.

Investors appeared to remain on the sidelines ahead of the euro area inflation data, which is expected to show that price growth eased to 5.3% in July from 5.5% a year earlier. The inflation report as well as second-quarter GDP data are due at 0900 GMT.

"With the ECB indicating that a pause might be coming when the governing council next meets in September, today's latest flash EU CPI for July could go further in reinforcing that narrative after Friday's slowdown in German inflation," Michael Hewson, chief market analyst at CMC Markets said in a note.

"We've heard several ECB policymakers expressing increasing caution over the growth outlook, which appears to be tempering enthusiasm for more aggressive rate action."

The ECB raised rates for the ninth successive time last week, but left the door open to a pause in September as inflation pressures show tentative signs of easing and recession worries mount.

Signs of easing inflation in the United States and Germany, some upbeat earnings and hopes that the Federal Reserve and the ECB are near the end of their tightening cycle have spurred a rally in markets in the recent weeks.

The German DAX touched record highs on Friday, while Italy's blue-chip FTSE MIB hit its strongest level since 2008 on Thursday.

Despite the mild losses on Monday, the STOXX 600 looked set for its second consecutive monthly gain.

An index of euro zone banks edged up 0.2% after the European Banking Authority's (EBA) annual stress test results showed three of 70 banks from the European Union failed to meet binding capital requirements.

Novo Nordisk gained 2.1% as it launched its blockbuster weight-loss drug Wegovy in Germany, its first big European market.

Reporting by Sruthi Shankar in Bengaluru; Editing by Sohini Goswami and Sherry Jacob-Phillips

Source: Reuters

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