Europe: Stocks scale 11-week high after soft US inflation data

EUROPEAN shares clocked an 11-week closing high on Thursday as a slower-than-expected rise in US consumer prices strengthened hopes of less aggressive interest rate hikes from the Federal Reserve going ahead.

The pan-European Stoxx 600 jumped 2.8 per cent, notching its biggest percentage gain in five weeks. All the sectors barring energy closed sharply higher, with rate-sensitive stocks at the forefront of the buying spree.

Europe’s technology and real estate sectors skyrocketed 7.6 per cent and 6.4 per cent, respectively, marking their best day in over two years.

A US Labor Department report showed consumer prices rose less than expected in October, pushing the annual increase below 8 per cent for the first time in eight months. This signalled that inflation was starting to subside, which would allow the Fed to dial back its hefty interest rate hikes.

“This feeds into the sentiment that the unemployment rate creeping up is moving in line with the smaller CPI data. We’ll see if the Fed pivots at some point, hoping sooner rather than later,” said Daniela Hathorn, market analyst at Capital.com. “The facts are against 75 bps (in December) now.”

The Euro Stoxx volatility index slid to a 12-week low of 21.31 points, reflecting easing anxiety among investors.

The Stoxx 600 index is now on track for its fourth straight week of gains, as hopes of a less aggressive stance by the US central bank in its fight against inflation and a better-than-expected earnings season offset worries of a recession in Europe.

Further, a European Central Bank board member noted that the bank has raised the amount of bonds it can lend against cash to 250 billion euros (S$351 billion) to ease a market squeeze that tends to get worse towards the end of the year.

Among single stocks, AstraZeneca gained 2.9 per cent as it raised its full-year adjusted earnings forecast after beating expectations for quarterly profit and revenue.

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Allianz gained 5.9 per cent as the German insurer gave a more optimistic full-year outlook after reporting a better-than-expected 17 per cent rise in third-quarter net profit. Germany’s Delivery Hero surged 18.6 per cent, to top the Stoxx 600, after it reassured investors about achieving an adjusted core profit margin in 2023 and upgraded its outlook for this year.

Meanwhile, the energy sector slipped 0.4 per cent as oil prices extended losses for the fourth consecutive day as renewed Covid-19 curbs in China raised concern about fuel demand in the world’s biggest crude importer. REUTERS