Europe: Shares rise as US inflation data soothes rate hike jitters
EUROPEAN shares rose on Tuesday, after mild US inflation data cemented bets the Federal Reserve could skip raising interest rates at its meeting this week, while miners rallied as metal prices jumped after China cut rates.
The pan-European Stoxx 600 index closed 0.6 per cent higher, tracking the global market rally.
US consumer prices barely rose in May and the annual inflation increase was the smallest in more than two years, supporting the view that the Fed would keep rates unchanged on Wednesday while adopting a hawkish posture.
“Markets love the idea right now that the Fed might take a break,” said Steve Sosnick, chief strategist at Interactive Brokers.
Traders see a 94 per cent chance of the Fed holding rates at the 5.00 to 5.25 per cent range on Wednesday, while pricing in a 60 per cent chance of a rate hike in July, according to the CME FedWatch tool.
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.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
“Comments by ECB speakers over the past few weeks have clearly opened the door to extending the period of possible rate hikes into September, with some officials signalling that several rate hikes after the one expected for June would be needed, while others open the door to a pause,” said Antonio Villarroya, head of G10 macro & fixed income strategy research at Santander CIB, in a note.
The Stoxx 600 has traded in a limited 1 per cent range for one week as markets look for more economic data and updates from major central banks to drive a definitive move.
The rate-sensitive tech sector index added 1.4 per cent, while miners jumped 2.7 per cent to a seven-week high.
Industrial metal prices rose after the People’s Bank of China (PBOC) lowered a short-term lending rate for the first time in 10 months to prop up risk sentiment.
China-exposed luxury giant LVMH, also Europe’s most valuable firm, rose 0.9 per cent, while peer Richemont climbed 2.0 per cent.
Meanwhile, German consumer prices, harmonised to compare with other European Union countries, rose by 6.3 per cent on the year in May, data showed.
In UK, wage growth soared and employment jumped in the three months to April, raising expectations that the Bank of England will raise interest rates again, perhaps several times, to contain unrelenting inflationary pressures.
Among individual stocks, Denmark’s Maersk climbed 4.6 per cent after saying it had secured fuel for the first container vessel able to run on carbon-neutral methanol for its inaugural journey from South Korea to Denmark.
Swedish industrial technology group Hexagon’s shares gained 4.0 per cent, after it announced a collaboration with Nvidia, the world’s most valuable chip firm.
Shares of Admiral slid 5.1 per cent after traders said Citi downgraded the British motor and home insurer to “sell.” REUTERS
Share with us your feedback on BT's products and services
