(Sharecast News) - European stocks raced higher on Wednesday afternoon after a slow start, with the Stoxx 600 benchmark jumping 1.2% to a new all-time high.
Heavyweight pharma stocks surged on hopes of a less stringent US trade tariffs following a pricing deal struck between the government and American peer Pfizer, which will now be able to sell drugs directly to consumers via a government-run website.

"Investors have taken news that the sector will sell direct to US citizens as a way of turbocharging earnings overall, rather than worrying about the impact of reduced prices," said Chris Beauchamp, chief market analyst at IG.

A raft of economic data more or less meeting expectations also helped sentiment in Europe, while Wall Street markets opened a touch higher as investors largely shrugged off political uncertainty following the US government stutdown.

The Stoxx 600 rallied in afternoon trade to finish the day 6.44 points higher at 564.62, surpassing a previous record high of 563.13 reached in March. The pan-European benchmark was given a big boost by strong gains on the FTSE 100 (up 1.0% at its own record high) and the Swiss Market Index (up 2.1%).

Eurozone inflation picks up

In economic data, eurozone inflation rose as expected in September, moving above the European Central Bank's 2.0% target for the first time in five months. The harmonised consumer price index (CPI) for the single-currency region was 2.2% higher than last September, according to Eurostat on Wednesday, up from 2.0% in August - a level where it had stayed for three months.

The figures follow comments from ECB chief Christine Lagarde on Tuesday who said that inflation risks were "contained". In a speech in Finland, Lagarde said that price pressures are unlikely to move much from the 2% target despite ongoing trade uncertainties.

The second reading of September's S&P Global/HCOB eurozone manufacturing PMI was revised to 49.8, up from the flash estimate of 49.5 released last week but still below the 50-point mark which separates growth from decline. This was down from 50.7 in August, which marked the first increase in manufacturing activity in more than three years.

S&P Global also reported that the UK manufacturing PMI for September was in line with its initial estimate at 46.2, down from 47.0 in August, marking the sharpest contraction in five months. This was the 12th straight month of contraction for the sector.

Meanwhile, Swiss retail sales fell at a year-on-year rate of 0.2% in August following 0.9% growth the previous month, according to the Swiss Federal Statistical Office, marking its biggest annual drop in 14 months.

Market movers

Pharmaceutical stocks were rising strongly across the continent following the announcement that the Trump administration was implementing so-called 'Most Favoured Nation' drug pricing plans, with drugmakers encouraged to drop US prices in exchange for more lenient tariffs on imports.

American firm Pfizer struck an agreement for a three-year grace period from sector-specific tariffs, after committing to additional investments in US manufacturing and R&D, raising hopes of similar deals for European outfits like Merck, Sanofi, AstraZeneca and Roche who all jumped more than 8% each.

"Overall, we see Pfizer's agreement on MFN as a potential bellwether for the sector which, we anticipate is likely to be replicated by EU Pharma companies and should therefore result in a broadly manageable impact from MFN on EU Pharma, reassuring investors," JPMorgan analysts said in a research note.

Sportswear and apparel groups Puma and Adidas rose strongly after sector leader Nike posted a surprise increase in quarterly sales on Tuesday evening - though the American brand did warn about continued weakness in China.

In London, Tate & Lyle was a heavy faller, dropping 12% after warning about a slowdown in market demand. For the full year, Tate & Lyle now expects both revenue and EBITDA to decline by a "low single-digit percent" compared to pro forma comparatives.

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