Europe: Shares post best month since Jan as tumbling inflation spurs rate cut bets
EUROPEAN shares hit a more than two-month high on Thursday, ending November sharply higher, after data showing a drop in inflation in the US and Europe boosted bets that central banks will soon be cutting interest rates.
The pan-European Stoxx 600 closed 0.5 per cent higher, posting its biggest monthly jump since January, with rate-sensitive real estate and technology stocks jumping 14.7 per cent each for the month.
Euro zone data showed inflation slowed to 2.4 per cent year on year in November from 2.9 per cent in October, well below expectations of a fall to 2.7 per cent, while in the US the annual increase in inflation was the smallest since early 2021.
Traders moved to fully price in the first 25 basis point interest rate cut in April in derivatives markets, while euro zone bond yields marked their biggest monthly drop in a year.
“There’s this tension around inflation and growth,” said Richard Flax, chief investment officer at Moneyfarm.
“Inflation on the margin is coming in a little bit lower than consensus forecast, but growth is a bit mixed.”
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Meanwhile, Italy’s benchmark stock index touched a fresh 15-year high, up 0.2 per cent, jumping 25.5 per cent so far in 2023 and outperforming the Stoxx 600’s 8.6 per cent advance this year.
“We’ve seen bond yields drifting lower, helping some of the peripheral markets,” Moneyfarm’s Flax said.
“Italy relatively from a macro perspective, is highly indebted and so relief on the yield side perhaps has a larger impact on financial assets in that market.”
The banks-heavy IBEX in Spain was subdued after scaling its highest level since 2018, following a rally of 22.2 per cent so far this year.
For the day, energy stocks rose 1.0 per cent as oil prices climbed in anticipation of the outcome of an Opec+ meeting.
Data showed German retail sales rose more than expected in October, while the number of unemployed people in Germany rose in line with expectations in November.
Germany’s benchmark stock index gained 0.3 per cent.
Dutch insurance company ASR jumped 13.0 per cent to top the Stoxx 600 after announcing a final settlement with interest groups concerning unit-linked products for an amount well below expectations.
Peer NN Group jumped 9.9 per cent, while the insurance sector gained 1.1 per cent.
Eurazeo climbed 9.7 per cent after the French investment company set out strategic objectives for 2024-2027.
VAT Group rose 4.5 per cent after JPMorgan upgraded the Swiss specialist valve maker to “overweight” from “neutral”, while Swiss engineering group ABB gained 1.8 per cent after unveiling higher sales and profitability targets.
Elekta shed 7.5 per cent after Barclays initiated coverage on the radiation therapy equipment maker with “underweight” rating. REUTERS
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