Europe: Luxury stocks, Federal Reserve rate pause bets boost shares
EUROPEAN stocks climbed on Thursday after a modest rise in US consumer prices fuelled hopes that the Federal Reserve was close to the end of its rate hikes, while the luxury sector got a boost from China easing travel restrictions.
The pan-European Stoxx 600 added 0.8 per cent, scaling its highest level in a week and rising for the second straight session.
US inflation increased moderately in July as costs for goods including used motor vehicles declined. The consumer price index (CPI) rose 3.2 per cent in the 12 months through July, below expectations of 3.3 per cent, per a Reuters poll of economists.
The data bolstered hopes that inflation in the world’s largest economy was trending lower, potentially allowing the Fed to hit the brakes on its rate hikes next month.
“There’s no incremental information out of the CPI report that should force the Fed to do another hiking. The numbers themselves are decelerating and that should be enough for the Fed to be on hold,” said Marcus Poppe, co-head of European equities at DWS Group.
Rate-sensitive real estate stocks rose 1.6 per cent, while Europe’s personal and household goods index topped sectoral gainers, rising 2.2 per cent after China lifted its pandemic-era restrictions on group tours for more countries, in a potential boon for its tourism sector.
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The index, which comprises the region’s largest luxury brands with significant exposure to China, logged its biggest one-day percentage gain in nearly four months.
French luxury group LVMH, currently Europe’s most valuable company, gained 3.4 per cent, pushing Paris’ blue-chip index up 1.5 per cent.
The travel and leisure sector added 1.5 per cent.
“Maybe they are allowed to travel more (but) the other part is you have domestic economic issues. So I am not sure I would be betting on the Chinese consumer to help Western luxury,” said Poppe.
Aiding insurers, Germany’s Allianz climbed 4.9 per cent after reporting better-than-expected quarterly profit.
Germany’s LEG Immobilien rose 3.6 per cent after reporting higher first-half results.
Signs of easing inflation in the United States and euro zone pushed the Stoxx 600 to an over one-year high last month, but slowing business activity across the globe and rising Treasury yields have piled pressure on equities in recent weeks.
Siemens dropped 4.8 per cent after the German engineering group missed third-quarter profit estimates.
Denmark’s Novo Nordisk slipped 1.2 per cent after the drugmaker said it will continue to restrict US supplies of starter doses of its hugely popular Wegovy weight-loss drug. REUTERS
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