European shares rise as tech leads gains on Fed rate optimism

European shares closed higher on Thursday, led by technology stocks, as hopes grew that the Federal Reserve’s post-pandemic tightening cycle was close to an end due to cooling US inflation.

The pan-European Stoxx 600 index ended 0.6 per cent higher, extending gains to the fifth straight day, its longest winning streak in nearly three months.

A faster-than-expected slowdown in US inflation reinforced bets that the Fed could end its rate hikes soon after July.

Dublin

Cairn Homes shares fell by 0.36 per cent to €1.12 on the back of news it had been granted planning permission for a €345 million, 608-unit apartment scheme on former RTÉ lands at Donnybrook in Dublin 4. However, in a split decision An Bord Pleanála refused permission for the 16-storey tower component of the scheme that was to include a 192-bedroom hotel and 80 apartments. It was a mixed day for banking stocks reflected by AIB, which fell by 0.7 per cent to €3.92, while rival Bank of Ireland put in another strong performance, rising 0.9 per cent to €9.10. Kenmare Resources rose by 2 per cent to €5.20 after the mining company said production in the first half of the year had been lower than expected, but the company expected that to pick up in the second half of 2023.

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London

UK’s FTSE 100 gained on Thursday as energy and mining stocks advanced, tracking higher commodity prices, while Barratt Developments tumbled after the homebuilder warned it would build about 20 per cent fewer homes in 2024.

The blue-chip FTSE 100 rose 0.2 per cent as heavyweight energy stocks advanced 0.6 per cent, tracking higher crude prices.

Miners of industrial and precious metals climbed 1.3 per cent and 0.7 per cent, respectively, as global metal prices appreciated on a softer dollar.

However, the broader homebuilders index fell 2.6 per cent, dragged by Barratt Developments.

Britain’s largest homebuilder slipped 4.4 per cent to hit its lowest in nearly seven months after flagging that rising mortgage rates and stubborn inflation could hit demand this fiscal.

Separately, an industry survey showed signs of a slowdown in Britain’s housing market in June, and property surveyors expect activity to remain subdued as higher borrowing costs hit new buyer enquiries.

Europe

Falling euro-zone government bond yields also helped stocks on Thursday as investors cheered prospects of peak interest rates, though they are still expecting the Fed to deliver a 25-basis point (bps) hike later this month.

“[Overall], the data didn’t have the effect it should have had on the market this morning as investors are mostly focused on central banks’ monetary policies,” said Pierre Veyret, technical analyst at ActivTrades.

Separately, data from the US also showed initial claims for state unemployment benefits dropped by 12,000 to a seasonally adjusted 237,000 for the week ended July 8th, but overall the labour market remains tight.

Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said the labour data added credence to the theory that the rate of inflation could keep coming down even if the labour market remained strong.

“The implication for investors is that buying stocks and bonds is the best course of action, unlike last year when both asset classes dropped in unison.”

Shares of Swatch rose 6.9 per cent after the watchmaker reported record growth in the first half of the year.

New York

US stocks rose again and global stock markets hit new highs for 2023 on Thursday, while the dollar and Treasury yields continued to slide, amid hopes slowing US inflation will persuade the Fed to pause rate hikes after this month.

Wall Street’s main stock indexes built on Wednesday’s sharp gains after data showed that consumer prices rose modestly in June, registering the smallest annual increase in more than two years.

Investors also digested fresh data on Thursday showing that US producer prices barely rose in June, US jobless claims unexpectedly declined and Chinese exports dropped.

The Dow Jones Industrial Average rose 0.11 per cent to 34,385.57, the S&P 500 gained 0.51 per cent to 4,494.79 and the Nasdaq Composite added about 1 per cent to hit 14,054.36.

PepsiCo added 1.4 per cent on raising its annual revenue and profit forecasts for the second time, banking on resilient demand for its snacks and beverages as well as price hikes.

Delta Air Lines gained 1.1 per cent after it lifted its full-year profit outlook following stronger-than-expected second-quarter earnings on a relentless post-pandemic travel boom. – Additional reporting: Reuters