investors react to US inflation data

LONDON — European stocks closed higher on Wednesday as investors watched the latest reading of US inflation data.

The pan-European Stoxx 600 closed 0.7% higher, with basic resources climbing 3.2% to lead the gains while healthcare stocks fell 0.7%.

French electrical components supplier Rexel saw its shares rise 10.3% to top the Stoxx 600 after raising its outlook for 2021.

At the bottom of Europe’s blue chip index, Dutch health-tech giant Philips plunged nearly 15.5% after issuing a fourth-quarter profit warning following parts shortages, increased provisions for device recalls and rising procurement costs.

Global markets had their eye on the latest US inflation reading on Wednesday to assess the economic situation of the world’s largest economy and the Fed’s next move.

The consumer price index rose 7% in December compared to 12 months ago, which means that annual inflation has reached its steepest slope in nearly 40 years.

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Fed Chairman Jerome Powell said on Tuesday that the economy is both healthy enough and needs tighter monetary policy, which will likely lead to rate hikes, a reduction in asset purchases and a smaller balance sheet. He did not, however, announce an accelerated change in policy from what the central bank had previously signaled.

On Wall Street, US stocks rose on Wednesday, extending a rally in the previous session following the release of December’s inflation report.

Chinese markets also rose on Wednesday, following gains across Asia-Pacific. Data released Wednesday in Asia included China’s consumer and producer price index for December. The index rose 1.5% in December from a year ago, according to Reuters – down from the 2.3% rise in November and lower than the 1.8% rise expected in a Reuters poll.

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– CNBC’s Ryan Browne, Weizhen Tan and Yun Li contributed to this report.