Europe: Shares clock third day of gains on upbeat economic data

EUROPEAN shares closed higher for the third straight session on Wednesday (Jan 4) as a lower inflation reading from France, the eurozone’s second-biggest economy and better-than-expected business activity data boosted sentiment.

The pan-European Stoxx 600 closed 1.4 per cent higher, while France’s CAC 40 jumped 2.3 per cent. Both indexes hovered at three-week highs.

Data on Wednesday showed euro zone business activity contracted less than initially thought, suggesting the bloc’s recession may not be as deep as feared.

Preliminary data showed inflation in France slipped in December from a record high in the previous month, tracking a slew of encouraging data from improving euro zone manufacturing numbers to a slowdown in Germany’s inflation.

“This is continuing the narrative that prices are slowing faster than expected, which is certainly welcome news for the eurozone as a whole because it eases the pressure on consumers and also companies,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

The regional Stoxx 600 ended 2022 sharply lower on fears of an economic slowdown as central banks raised rates to rein in soaring prices, driven by surging fuel costs since Russia invaded Ukraine and a reopening of the economy after the Covid-19 pandemic.

Investors are now waiting for the minutes from the Fed’s December meeting for cues on the US central bank’s monetary policy tightening path.

European shares rose much more than Wall Street for the second straight session, in a sign that investors might be warming up to continental stocks.

“After years in which it was folly to do anything but buy American stocks, there are signs perhaps that non-US equities are coming into their own once again,” said Chris Beauchamp, chief market analyst at online trading platform IG.

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“It looks like investors are much keener on putting their money to work this side of the Atlantic.”

The Stoxx 600 index has risen 3.6 per cent in the first three trading days of the new year, also helped by the easing of natural gas futures and hopes of a post-Covid recovery in China despite surging cases.

China-exposed luxury companies LVMH and Richemont rose 5.0 per cent and 2.4 per cent, respectively, lifting the index.

Economy-sensitive financials such as banks and insurers also led to gains in early trading.

Switzerland-based energy company BKW rose 3.8 per cent after upgrading its 2022 outlook.

Britain’s commodity-heavy FTSE 100 lagged European peers as prices of oil and base metals fell. REUTERS