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European Stocks Close Slightly Higher Despite Rising Bond Yields, UK Inflation

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  • Investors are grappling with the prospect of higher interest rates, which could knock high-growth sectors like technology.
  • The U.K. inflation rate soared to a 30-year high in December, the Office for National Statistics said Wednesday.

LONDON — European stocks closed slightly higher on Wednesday, seemingly shrugging off concerns about rising bond yields as well as historic U.K. inflation levels.

The pan-European Stoxx 600 closed up by 0.2% after initially starting the session in the red. Mining stocks led the gains, climbing 2.7%.

Investors are grappling with the prospect of higher interest rates, which could knock high-growth sectors like technology. European tech stocks were among the biggest fallers Wednesday, slumping 0.9%.

U.S. bond yields continued their year-to-date climb on Tuesday with the 10-year Treasury topping 1.89%, its highest level in 2 years. The 10-year yield started the year around 1.5%. Meanwhile, the 2-year rate — which reflects short-term interest rate expectations — topped 1% for the first time in two years. Bond yields move inversely to prices.

Investors remain jittery over the U.S. Federal Reserve's schedule for hiking interest rates and tightening its ultra-loose pandemic-era monetary policy.

On Wall Street, the major U.S. averages extended their declines following a steep drop a day earlier. Bank of America beat Wall Street estimates Wednesday as it released pandemic-related loan loss reserves. However, Goldman Sachs missed expectations with its fourth-quarter report released Tuesday.

The U.K. inflation rate soared to a 30-year high in December, the Office for National Statistics said Wednesday, as higher energy costs, resurgent demand and supply chain issues continued to drive up consumer prices.

Inflation hit an annual 5.4%, its highest since March 1992 and up from 5.1% in November, itself a decade high. Economists polled by Reuters had expected an increase of 5.2%.

Earnings in focus

Corporate earnings were a key driver of individual share price action in Europe on Wednesday, with Richemont, WH Smith, JD Wetherspoon and Burberry among those reporting.

Richemont shares jumped 5% toward the top of the Stoxx 600 after the Swiss luxury goods giant posted a sharp rise in quarterly sales, fueled in particular by jewelry.

Burberry also reported a strong set of results and lifted its profit outlook on the back of accelerating full-price sales growth. The British luxury fashion house's shares traded 6.3% higher.

At the bottom of the European blue chip index, Spanish lender Banco Sabadell sank 5%.

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— CNBC's Ryan Browne contributed to this market report.

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