Shares advance ahead of likely Federal Reserve rates pause

European stocks advanced on Wednesday amid an uptick in sentiment following unexpectedly positive UK inflation data as investors awaited the US Federal Reserve’s latest interest rates decision.

The US central bank is expected to maintain its key rate in the range of 5.25 per cent to 5.5 per cent as it concludes its meeting on Wednesday evening, with investors focused on Fed economic projections and chair Jerome Powell’s comments for clues on the outlook for rates and inflation.

Dublin

The Iseq index performed in line with its European peers, adding more than 0.8 per cent in Wednesday’s session.

In its last day of trading on the Euronext Dublin, CRH mirrored the performance of UK and European peers, adding 1.5 per cent to close at €50.34 in what traders in Dublin described as an “unexciting” final Irish outing for the construction materials giant’s shares.

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Home builders Cairn Homes and Glenveagh advanced 1.3 per cent and 1.6 per cent to €1.10 and €1.01 per share, mirroring their peers as rates-sensitive construction companies advanced on better-than-expected UK inflation data. Kingspan was also ahead by more than 2 per cent to finish the day €72 per share.

Meanwhile, amid ongoing reports of a merger with US-based Westrock, shares in Smurfit Kappa declined by 4 per cent on average volumes to €32.28 per share. Traders expect the stock to remain volatile as the merger discussions continue to generate headlines.

Hotels group Dalata gained 2.7 per cent to close at €4.15 with a large number of its shares changing hands in the past two sessions.

Benefiting from a fall in global oil prices, Ryanair advanced 0.6 per cent to €15.55 per share.

Europe

European shares moved higher on improving sentiment around the trajectory if inflation with the blue-chip Stoxx 50 and the pan-European Stoxx 600 both ahead by almost 1 per cent.

Hammerson, up 5.2 per cent on the session, and other UK housebuilders helped move the cross-continent index higher while major European luxury names boosted the benchmark index. Kering, Hermés and Ray-Ban maker EssilorLuxottica all advanced by between 0.4 per cent and 2.4 per cent with Louis Vuitton owner LVMH the only outlier, shedding 0.1 per cent.

TotalEnergies and Air Liquide, off by 0.2 per cent and 1.6 per cent respectively, sold off somewhat amid a fall in natural gas futures.

London

UK stocks rose and the pound weakened after British inflation slowed unexpectedly, catching traders off guard as they prepare for the Federal Reserve’s policy decision later.

Britain’s consumer prices index rose 6.7 per cent from a year earlier in August, the slowest pace in 18 months, and less than the 7 per cent expected by economists. The probability of a quarter-point rate increase by the Bank of England at its meeting on Thursday – almost guaranteed earlier this week – fell to 50 per cent, according to swap pricing.

The benchmark FTSE 100 index moved nearly 1 per cent higher while the mid-cap FTSE 250 gained 1.5 per cent.

Housebuilders and developers, sensitive to interest rate shifts, were among the biggest winners on the day. After underperforming the market on Tuesday, Barratt Developments advanced 4.7 per cent with Taylor Wimpey topping the blue-chip index, adding 5.6 per cent while Persimmon added close to 5.1 per cent.

The big names in British lending also moved higher with Barclays, NatWest and Lloyds all ahead by between 0.2 per cent and 4 per cent.

New York

The S&P 500 and the Dow Jones Industrial Average gained 0.2 per cent and 0.6 per cent by closing bell in Dublin on Wednesday in advance of a likely pause in the Federal Reserve’s policy tightening campaign. The Nasdaq Composite, meanwhile, was essentially flat in early trading.

Megacap growth stocks including Alphabet, Microsoft and Apple lost between 0.7 per cent and 1.6 per cent, weighing on the tech-heavy Nasdaq.

Pinterest added 4.3 per cent as Citigroup upgraded the image-sharing platform to “buy” from “neutral” and as the firm announced a share buyback of up to $1 billion.

Beauty product group Coty added 5.1 per cent after the CoverGirl parent raised its annual like-for-like sales forecast.

New entrant to the market Instacart lost 5.5 per cent while Arm Holdings was down 4.4 per cent. – Additional reporting: Bloomberg, Reuters