Europe: Shares inch up on China boost; rate hike fears limit gains
EUROPEAN shares rose on Tuesday (Jun 27) supported by financials and luxury stocks as investors bet on further policy stimulus from China, while hawkish comments from European Central Bank (ECB) president Christine Lagarde limited gains.
The pan-European Stoxx 600 index closed 0.1 per cent higher, snapping its six-day losing streak.
China’s Premier Li Qiang said the country’s economic growth in the second quarter would be higher than the first and was expected to reach the annual economic growth target of around 5 per cent.
The comments brought some relief to investors concerned in recent days by smaller-than-expected rate cuts from China, political instability in Russia after a failed mutiny, as well as a potentially protracted global interest-rate hiking cycle.
“Markets are expecting either the data to improve from China or stimulus to increase from the government. But that good stimulus news is priced in and any sort of good news that I would need to see to send markets significantly higher in China would be some kind of positive domestic growth story,” said Giles Coghlan, chief market analyst at HYCM.
The financial sector was the biggest boost to the benchmark index due to gains in China-exposed companies such as HSBC and insurer Prudential, while luxury giants such as LVMH and Richemont which also have exposure to China, gained between 0.6 per cent and 1.2 per cent.
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Eurozone inflation has entered a new phase which could linger for some time, ECB president Christine Lagarde said, outlining a lengthy fight against price growth that must dampen demand and force firms to curb prices.
“What you’ve seen is those gains from early this morning peter out and particularly after Christine Lagarde spoke, because she again has reinforced this view that inflation is still staying far too high,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“This realisation is dawning among investors yet again, that the inflationary fight is far from over.”
The healthcare index was dragged down by shares of kidney dialysis group Fresenius Medical Care, which fell 5.5 per cent after a payment increase proposed by a major US public health insurance body fell short of market expectations.
The healthcare sector has been declining in recent weeks and is down nearly 2.9 per cent so far this month.
Streeter said the downfall could be potentially due to a waning in risk appetite and also high interest rates having an impact on financing as well as on deals.
Siemens Energy rose 2.3 per cent recovering some losses after Goldman Sachs analysts kept a “buy” rating on the stock and said the massive sell-off following the disclosure of problems at its wind turbine division was overblown. REUTERS
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