Europe: Shares end worst quarter in a year with minor gain

EUROPEAN shares rose on Friday (Sep 29) after a drop in eurozone inflation in September cemented hopes the European Central Bank (ECB) will pause its interest rate hikes, but the benchmark index still logged its worst quarter in a year.

The pan-European Stoxx 600 index was up 0.4 per cent on Friday, but ended the quarter 2.5 per cent lower.

Inflation in the eurozone hit its lowest level in two years in September, suggesting the ECB’s steady diet of interest rate hikes was succeeding in curbing runaway prices, albeit at a growing cost for economic growth.

“If disinflation and stagnation continue as we think, discussions about rate cuts will return sooner than markets expect,” Davide Oneglia, director for European and Global Macro at TS Lombard, said.

Germany’s 10-year government bond yield, the benchmark for the euro area, was down 15 bps at 2.818 per cent.

Rate-sensitive real estate shares rose the most in more than ten weeks, jumping 2.7 per cent, while technology shares added 1.1 per cent after softer-than-expected inflation data.

Tech stocks have underperformed this quarter to fall more than 10% as bond yields rallied on worries about higher-for-longer interest rates.

Oil and gas shares were the worst hit during the session, falling 1.3 per cent after oil prices fell, with macroeconomic concerns curbing a recent rally.

German retail sales unexpectedly fell in August as high inflation took its toll on consumption in the euro zone’s largest economy, while inflation in France unexpectedly slowed in September.

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Among individual stocks, Commerzbank was the top gainer on the Stoxx 600, soaring 11.1 per cent after the German lender said it was revamping its payout policy for investors, aiming for a return of least 70 per cent of profit for 2024.

Adidas climbed 6.2 per cent after US peer Nike beat profit estimates on Thursday.

Luxury stocks such as LVMH and Richemont gained 1.5 per cent and 1.9 per cent respectively.

London’s commodity-heavy FTSE 100 meanwhile climbed 0.1 per cent and was up 1.0 per cent this quarter, outpacing European peers.

Britain’s economic performance since the start of the Covic-19 pandemic has been stronger than previously thought, with faster growth than Germany or France, based on revisions to official data. REUTERS