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By Shreyashi Sanyal and Amruta Khandekar
Feb 14 (Reuters) – European shares closed slightly higher on Tuesday after encouraging trade updates but pared most of their early gains as investors faced mixed U.S. inflation data that kept them going expecting further rate hikes from the Federal Reserve.
* The Continental STOXX 600 Index closed 0.1% higher, after hitting a nearly one-year high in the previous session.
* The long-awaited report from the US Department of Labor showed an acceleration in consumer prices in January, but there were signs of easing price pressures that could keep the Federal Reserve on a path of moderate increases in prices interest rate .
* European markets were reacting to US inflation data, given expectations that the European Central Bank (ECB) and Bank of England would likely follow the Fed in their monetary policy decisions, said Stuart Cole, chief economist of macroeconomics at Equiti Capital.
* Elsewhere, data showed eurozone employment grew twice as much as expected in the last quarter, pointing to higher underlying inflationary pressures that could keep interest rates high for longer.
* Gabriel Makhlouf, a member of the ECB’s Governing Council, told the Wall Street Journal in an interview that the bank could raise interest rates above 3.5% and probably won’t lower them again this year.
* The STOXX 600 is up 8.8% year-to-date, supported by better-than-expected earnings and a brighter outlook for the eurozone economy.
* Telecommunications rose 1.5% on Tuesday, leading the gains among the STOXX 600 sectors, with Vodafone adding 3.4% after Liberty Global bought a 5% stake in the British telecom operator. .
* London’s FTSE 100 rose 0.1%, hitting a new high at the close.
* Shares of Coca-Cola HBC AG rose 5.0% after Swiss-based product bottler Coca-Cola reported better-than-expected operating profit for the full year.
(Reporting by Shreyashi Sanyal and Amruta Khandekar in Bengaluru Editing in Spanish by Ricardo Figueroa)