Europe: Shares rise ahead of central bank rate decisions

EUROPEAN shares rose at the start of an event-heavy week as investors buckled up for a key US inflation print and interest rate decisions from major global central banks, while weakness in metal prices knocked down miners.

The pan-European Stoxx 600 gained 0.4 per cent, holding to its highest level in 22 months.

The index has advanced 11.6 per cent so far this year, mainly boosted by bets of interest rate cuts on evidence of slowing inflation and a likely shallow recession in the euro zone economy.

Goldman Sachs raised its 12-month forecast for the pan-European index to 500, implying a nearly 6 per cent gain through 2024-end, on expectation of lower interest rates.

The Stoxx 600 has underperformed its US peer S&P 500’s nearly 20 per cent jump, with Wall Street benefiting from an investor rush for artificial intelligence stocks.

“We’ve certainly had an extraordinary sort of early Santa rally and probably the biggest fundamental driver of that has been this dramatic fall in global bond yields,” said Ben Laidler, global markets strategist at investing platform eToro.

In an evaluation for the market’s growing speculation of monetary policy easing globally are crucial US inflation reports and interest rate decisions from the Federal Reserve, the Bank of England and European Central Bank through this week.

“The challenge for this week is if you’re going to get a central bank fight back against this dramatic market repricing of early rate cuts,” eToro’s Laidler added.

Investors seem to be looking past the ECB’s mantra that rates will stay high for some time, with arch-hawk Isabel Schnabel’s sudden dovish turn and expectations of the ECB lowering its growth and inflation projections for next year also supporting such sentiment.

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Meanwhile, Poland’s WIG 20 index added 0.3 per cent, after Prime Minister Mateusz Morawiecki lost a vote of confidence, clearing the way for a broad coalition of pro-European Union parties led by Donald Tusk to take power.

Miners eased 0.9 per cent, leading sectoral declines, as prices of most metals moved lower against a stronger dollar.

Solvay dropped 29.1 per cent to the bottom of the Stoxx 600 following the demerger of Syensqo from the chemical company. The latter was up 18.8 per cent on the first day of its trading.

Encavis fell 8.8 per cent after Morgan Stanley downgraded the German renewable energy producer to “underweight” from “equal-weight”, while Rolls-Royce gained 2.6 per cent after Citi upgraded its forecast on the British engineering company’s earnings.

Swiss circuits and motors maker climbed 2.8 per cent on a ratings upgrade by Citi.

Schibsted jumped 14.8 per cent after the Norwegian media group said it has made a non-binding agreement to sell its news media operations to Tinius Trust. REUTERS