STOXX 600 hits record high on earnings, rate cut optimism
Europe’s benchmark stock index hit a record high on Friday, on track for its biggest weekly gain since late January, as risk appetite was bolstered by growing bets of interest rate cuts in the region and a strong earnings season.
The pan-European STOXX 600 climbed 0.8%, as of 0830 GMT, with Germany’s benchmark index also touching a record high.
European shares have reclaimed their record-breaking rally, with the STOXX 600 eyeing a 3% weekly gain, after investors took a breather in April.
The euphoria around artificial intelligence and monetary policy easing, among others, had sparked bumper gains in the region’s stocks since late 2023.
“An improved macro backdrop should be supportive for the European equity market valuations remain very reasonable and perhaps there’s still some room for them to expand,” said Thomas McGarrity, head of equities, RBC Wealth Management in the British Isles.
Underscoring Europe’s divergence from the US Federal Reserve and boosting equities, the Bank of England hinted at summer rate cuts and Sweden’s Riksbank delivered its first cut since 2016 earlier this week.
Meanwhile, the European Central
Bank in its latest policy meeting signalled a June rate cut.
RBC’s McGarrity expects both the ECB and the BoE to cut rates three times this year, supporting their economies. Minutes from the ECB’s last policy meeting, due on Friday, are in focus now. Utilities advanced 1.8%, with Italy’s Enel rising 3.6% following a higher first-quarter core profit. Portugal’s largest utility firm EDP climbed 4.2% after a bigger-thanexpected jump in first-quarter net profit.
Basic resources rose 1.7%, tracking higher metal prices. Anglo American advanced 1.8% after a report said mining giant Rio Tinto had considered an offer for the British miner.
Iveco Group jumped 6.6%, after the Italian truck and bus maker reported higher first-quarter operating profit, with margin improving in all business segments. Zalando rose 3.3% after Berenberg upgraded the German online retailer to “buy” from “hold”, while Italian defence group Leonardo rose 4% after UBS upgraded the stock to “buy” from “neutral”.
On the flip side, Getinge slumped 7.5% after the US FDA issued a warning on the safety of two of the Swedish medical equipment maker’s heart devices.
British real-estate portal Rightmove lost 5% after cutting its 2024 average revenue per advertiser (ARPA) growth estimates.
Symrise dropped 1.1% after Berenberg downgraded the German flavour and fragrance maker to “hold” from “buy”. European stock markets advanced at the start of trade on Thursday with London close to a record high before a Bank of England decision on interest rates.
London’s FTSE 100 index rose almost 0.1 percent to stand at 8,369.93 points, ahead of a BoE rate call at 1100 GMT. In the eurozone, Frankfurt’s DAX index won 0.3 percent to 18,559.57 and the Paris CAC 40 index was marginally higher at 8,134.18 points.
The British central bank was set Thursday to keep its main interest rate at a 16-year high, resisting a cut as UK inflation cools at a slower pace than forecast.
The BoE is widely expected to maintain borrowing costs at 5.25 percent for a sixth meeting in a row, mirroring a wait-and-see approach by the US Federal Reserve and European Central Bank.
London’s FTSE 100 index forged an all-time peak at 8,364.04 points on the eve of a monetary policy decision from the Bank of England, which is forecast to hold rates but could flag a summer reduction.
Frankfurt and Paris stocks also pushed higher, shrugging off Asian losses and lacklustre Wall Street, boosted by speculation that the European Central Bank could also decide to cut rates soon.