Europe: Shares recover on US rate-cut optimism; Ukraine peace talks in focus

[BENGALURU] European shares ended higher on Monday (Nov 24), boosted by technology-focused stocks as risk sentiment improved on growing expectations of a US interest rate cut next month, while investors also focused on progress in the Ukraine peace plan.

The pan-European Stoxx 600 was up 0.31 per cent to 563.83 points at close after the index logged its steepest weekly drop since late July on Friday.

The upbeat momentum was led by Wall Street following dovish comments from US Federal Reserve policymaker John Williams on Friday, signalling that interest rates could fall “in the near term”.

This bolstered the likelihood of a cut at the central bank’s December meeting, even as several Fed officials remain divided over the policy outlook amid limited clarity on the health of the US economy.

“We do have this optimism after just one person at the Fed mentioned the idea of near-term rate cuts, and we see the positive impact of that in the US markets, and that’s echoing positively across European markets as well,” Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said.

In Stoxx 600, the region-wide technology index provided the biggest boost, up 1.4 per cent after a sharp fall in the prior session, with AI-related names leading gains.

Chip equipment maker ASML jumped 3.1 per cent and chipmaker Infineon advanced 3 per cent, while Siemens Energy, which supplies heavyweight energy infrastructure for chip manufacturing, climbed 5.5 per cent after Friday’s 10.1 per cent fall.

Travel and Leisure and Basic Resources rose about 1.9 per cent each, while the construction and materials sector added 1.5 per cent.

European auto stocks gained 1 per cent. Goldman Sachs sees premium European carmakers as the most undervalued. The broker initiated coverage on Mercedes and with “buy”, taking their shares up 0.8 per cent and 2.3 per cent, respectively. It started Stellantis, up 3.4 per cent, with “neutral”.

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European shares log a weekly decline, defence stocks slide

Europe’s defence stocks extended their sell-off on Monday, down 2.1 per cent, in view of talks between the US and Ukraine in Switzerland aimed at ending the war in Ukraine.

Washington and Kyiv said that they had drafted a “refined peace framework” on Sunday, after agreeing to modify a US proposal that Kyiv and its European allies saw as a Kremlin wish list.

“On Sunday, the US said this week’s deadline to accept the deal is not a hard deadline, and there could be some leeway on the terms. This suggests that Donald Trump’s peace plan still stands a chance, especially if he is willing to make concessions to the Ukrainians,” Kathleen Brooks, research director at XTB, said in a note.

Stoxx 600’s gains this year have been driven in part by defence stocks on prospects of higher Nato spending. But progress towards a possible ceasefire could prompt investors to temper their reliance on the sector.

Marquee defence names such as Renk, Rheinmetall, Hensoldt and Saab declined between 4.3 and 5.6 per cent.

Meanwhile, Bayer gained 9.3 per cent to top the Stoxx 600, after initial clinical trial results turned around the fortunes of a key cardiovascular drug that suffered a major development setback two years ago.

In contrast, heavyweight drugmaker Novo Nordisk dropped 5.8 per cent, its worst day since Oct 17, after its Alzheimer’s drug trial failed to meet its main goal.

Lender Julius Baer concluded a credit review with further write-down. Shares of the Swiss bank fell 4.4 per cent.

A survey showed German business morale unexpectedly fell in November. Investors will be watching the British annual budget on Wednesday amid uncertainty over tax hikes and US economic data to the week. REUTERS