Europe: Shares rise on Federal Reserve pause hopes
EUROPEAN shares rose on Wednesday, supported by banks and miners, ahead of a broadly priced-in pause in interest rate hikes by the US Federal Reserve.
The pan-European Stoxx 600 index closed 0.4 per cent higher.
Banks, which tend to benefit from higher rates, rose 1.1 per cent. Italy and Spain’s lender-heavy indexes rose 0.9 per cent and 1.1 per cent, respectively, to spearhead gains among major regional peers.
Traders all but fully baked in the Fed holding rates at the 5.00 to 5.25 per cent range later in the day, while giving it a 60 per cent chance of a rate hike in July, according to the CME FedWatch tool.
A larger-than-expected drop in US producer prices in May signalled that inflation was cooling and helped cement bets for a pause in tightening, further supported by data a day earlier that showed consumer prices moderated last month.
“The widespread expectation is that they would take a breather and assess the data that they currently have,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
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“Core prices are staying sticky and that will be a concern, but I expect that there will be comments made by the Chair (Powell) about keeping the door open to further potential rate rises.”
The European Central Bank will hold its policy meeting on Thursday, where it is expected to hike rates by another 25 basis points to tame stubborn inflation.
Markets are looking for more economic data and updates from major central banks to drive a definitive move, as the Stoxx 600 stays restricted to a 1 per cent trading range for over a week.
Miners led sectoral gains, up 2.3 per cent, as copper prices rose on a weaker dollar and expectations of further stimulus to boost economic growth in top consumer China boosted sentiment.
Data showed British economic output inched higher as expected in April, driven by the retail sector and the filming industry.
London’s FTSE 100 index closed 0.1 per cent higher.
Logitech plunged 12.5 per cent to the bottom of the Stoxx 600 after the computer accessories maker said chief executive officer and president Bracken Darrell is resigning from his role effective immediately.
The travel & leisure index fell 1.1 per cent as Ladbrokes-owner Entain dropped 8.7 per cent, after it said it would buy Poland-based sports betting operator STS Holdings for £750 million (S$1.27 billion).
Shares of Spanish drugmaker Grifols jumped 6.8 per cent to the top of the Stoxx 600 after it disclosed a plan to reduce its stake in Shanghai RAAS in a deal that would bring it US$1.5 billion. REUTERS
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