Europe: Shares slip overall, but German blue chips hit record high

EUROPEAN shares retreated from multi-month highs on Friday (Jul 28) after a mixed bag of earnings and a surprise Bank of Japan (BOJ) policy tweak, but German blue chips bucked the trend to close at a record high on signs of cooling inflation.

The pan-European Stoxx 600 index ended 0.2 per cent lower after closing at its highest level in nearly 1-1/2 years on Thursday, when the European Central Bank hiked interest rates as expected, but raised the possibility of a pause in September.

Rattling investor nerves, the BOJ made its yield curve control policy more flexible and loosened its defence of a long-term interest rate cap, in moves seen as a prelude to an eventual shift away from the massive monetary stimulus.

“We have the last of the accommodative central banks moving away from accommodative policies,” said Steve Sosnick, chief strategist at Interactive Brokers.

“The fear of this BOJ move was because it can really affect hedge funds’ carry trade... there was a fear that this could really spiral out from Japan yields (but) it hasn’t happened.”

Germany’s DAX index hit an intraday record and held on to most of the gains to close 0.4 per cent higher after data showed inflation resumed a downward trend in Europe’s largest economy.

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However, separate data showed the economy stagnated in the second quarter of 2023, missing forecasts for modest growth

Elsewhere, Spanish consumer prices rose by a more than anticipated 2.3 per cent in the 12 months through July.

Despite Friday’s weakness, the benchmark Stoxx 600 notched up a third straight week of gains, on hopes that the Federal Reserve and the ECB are nearly done hiking interest rates.

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Europe: Blue-chip shares at 15-year high as ECB fans rate pause hopes

Tech stocks and miners were among the week’s top gainers, adding 3.6 per cent and 3.4 per cent respectively.

Hermes rose 3.9 per cent as sales at the Birkin bag maker accelerated in the second quarter, while AstraZeneca advanced 3.3 per cent after reporting forecast-beating profit and sales.

French drugmaker Sanofi slipped 2.9 per cent as quarterly sales fell short of estimates, and French IT consulting group Capgemini tumbled 7 per cent on a bigger-than-expected slowdown in second-quarter growth.

Austrian sensor maker AMS Osram jumped 18.5 per cent after the company presented a strategic realignment of the group and reported second-quarter results in line with its expectations.

Pan-European stock and derivatives exchange Euronext climbed 7.4 per cent, boosted by the launch of a 200 million euro (S$293.5 million) share buyback programme. REUTERS