Europe: Shares gain as homebuilders surge; UK stocks shine

EUROPEAN shares closed higher on Wednesday (Jul 19), with UK stocks in the lead after a faster-than-expected slowdown in British inflation helped to bolster hopes of peaking interest rates and pushed homebuilders higher.

The pan-European Stoxx 600 index ended up 0.3 per cent, extending gains to the second straight session.

London’s export-oriented FTSE 100 index advanced 1.8 per cent as the pound slipped following the inflation reading, which also sparked a rally in the broader real estate index up 4.3 per cent.

The sector led gains among peers, rising to a more than two-month high.

Data showed British inflation cooled by more than expected in June and rose by its slowest pace in more than a year.

“Inflation finally seems to be coming down. Even core inflation is coming off and that basically opens the prospect of central banks not being as hawkish as they’ve sounded of late,” said Andrea Cicione, head of research at TS Lombard.

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For the European Central Bank, money markets are still pricing in a 97 per cent chance of a 25 basis point hike in interest rates next week.

While markets remain focused on data and policymakers for signs of slowing inflation and monetary policy trajectory, earnings are also on the radar.

Second-quarter earnings for Stoxx 600 companies are expected to fall 9.2 per cent from the previous year, based on Refinitiv IBES data.

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“In Europe, positive earnings have been a tailwind to the broader equity markets so far this year and that’s something we struggle to see persisting through the back half of the year,” said Laura Cooper, senior macro strategist for iShares EMEA at BlackRock.

“We’re tilting away from luxury stocks and we like cyclicals where the earnings damage is already priced in like the energy sector.”

Europe’s mining sector dropped 1.1 per cent, pressured by a 1.4 per cent drop in shares of Antofagasta after the Chilean miner lowered its full-year copper output forecast.

Kering jumped 7.4 per cent on a report that the company is speaking to corporate finance advisers to defend it against potential bidders. The French luxury group extended gains after naming managing director Jean-Francois Palus as Gucci’s new CEO.

ASML Holding beat second quarter earnings expectations and raised its full-year forecast on strong demand from China. Shares of the Dutch chipmaker were, however, down 1.9 per cent.

Advertising groups WPP and Publicis fell 1.6 per cent and 2.8 per cent, respectively, tracking losses in their American peer Omnicom Group on missing second-quarter revenue estimates. REUTERS