Big Pharma drags European shares down; inflation data in focus

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 30, 2022. REUTERS/Staff

By Bansari Mayur Kamdar

(Reuters) -European shares slipped on Thursday, led lower by drugmakers ahead of euro zone inflation data, while minutes from the U.S. Federal Reserve's December meeting showed the central bank was committed to taming inflation.

The pan-European STOXX 600 slipped 0.2% by 0920 GMT, having climbed more than 3% in the first three sessions of 2023.

Minutes on Wednesday from the Fed's December policy meeting showed officials were worried about "misperception" in financial markets that their commitment to fighting inflation was flagging, though they agreed the central bank should slow the pace of its monetary policy tightening.

The market was hoping the minutes could be a "blueprint to a pivot," said Danni Hewson, an analyst at AJ Bell. "What we got out of those Fed minutes was a reality check."

Healthcare stocks dragged, with pharma giants like Novartis AG and Sanofi (NASDAQ:SNY) shedding more than 1% each.

"The update from WHO about there not being a new variant coming out of China has made investors think there's not going to be quite the payday that they had expected," added Hewson.

"Another thing which will be weighing on investors' minds is inflation and the cost of living crisis because governments and consumers are having to think about where they spend their cash."

China-exposed luxury stocks such as LVMH and Hermes International (OTC:HESAF) fell over 1% each as rising COVID cases in the world's second-largest economy stoked worries over demand.

After a rough 2022, European shares had a strong start to the year, supported by economic data showing a milder-than-expected recession and easing of price pressures in some countries, along with hopes of a post-COVID recovery in China.

Investors await producer price data, due at 1000 GMT, for clues on the impact of the European Central Bank's aggressive tightening to tamp down inflation.

British clothing retailer Next jumped 7.8% after reporting better-than-expected fourth-quarter sales and raising its 2022-23 profit forecast.

The retail sector led sectoral gains in early trading, rising 2%. Retail stocks were battered last year, posting their worst annual performance since 2008, as rising interest rates and high inflation put pressure on household budgets.

German exports unexpectedly fell in November as high inflation and market uncertainty continue to weigh on Europe's largest economy despite fading supply chain problems.

Ryanair gained 5.9% on lifting its profit-after-tax forecast, citing recent pent-up travel demand while warning that COVID and the war in Ukraine could still impact its results.