European Shares Rise with Focus on U.S. Inflation Data

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European shares advanced on Thursday, with the pan-European STOXX 600 gaining 0.5% by 0921 GMT. The upward movement was led by increases in automobile and technology stocks. Investors are eagerly awaiting the U.S. inflation report, scheduled for 8:30 a.m. ET (1330 GMT), to gain insights into the potential trajectory of interest rate cuts by major central banks, particularly the Federal Reserve. Market participants are anticipating around 140 basis points of rate cuts by the U.S. central bank this year, while there is a more than 30% chance of at least a 25 bps cut by the European Central Bank (ECB) as early as March.

Sectoral Performance and Market Expectations

The automobiles and parts index exhibited notable gains, surging 1.3% and set for its best day in nearly a month. Precious and base metal miners also rose by 0.7%, supported by an increase in the prices of gold and copper as the dollar softened. Technology stocks added 0.7%, following overnight gains in the tech-heavy Nasdaq. Investors are closely monitoring central bank communications, especially from the ECB, as there is a perceived shift in tone with discussions about weaker growth and inflation. Some market participants are anticipating two to three rate cuts from the ECB in 2024.

ECB’s Stance and Individual Stock Movements

Francois Villeroy de Galhau, a member of the ECB, affirmed the previous estimate for French economic growth in 2024, dismissing concerns of a recession. France’s CAC 40 edged up 0.2%, and Copenhagen’s OMX 20 index reached a fresh record high, gaining 0.5%. Rational AG shares rose 6%, topping the STOXX 600, as the industrial kitchen retailer’s preliminary 2023 results exceeded market expectations. VAT Group shares increased by 0.9% after the Swiss industrial valves maker reported a robust beat in fourth-quarter orders. However, British retailer Marks & Spencer experienced a 4.9% decline, emerging as the largest loser on the STOXX 600, following profit-taking triggered by an uncertain outlook.

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