European Stocks Close Higher On Fed Rate Cut Hopes

European stocks closed higher on Friday with investors expecting a larger interest-rate cut from the Federal Reserve next week after former New York Fed President Bill Dudley’s comments that that there was a strong case for a 50 basis point reduction.

Investors also digested the latest batch of economic data from the region, and looked ahead to the Bank of England’s policy announcement next week.

The pan European Stoxx 600 climbed 0.76%. The U.K.’s FTSE 100 gained 0.39%, Germany’s DAX jumped 0.98% and France’s CAC 40 ended 0.41% up, while Switzerland’s SMI closed up 0.46%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden and Turkiye all ended on a firm note, while Iceland ended flat.

In the UK market, Endeavour Mining soared nearly 11%. Fresnillo climbed about 5.7%. Entain, JD Sports Fashion, Airtel Africa, Smith (DS), Convatec Group, Anglo American Plc, ICG and Schrodders gained 2 to 3%.

Frasers Group advanced nearly 2%, while IAG, Intertek Group, Rentokil Initial, Kingfisher and Antofagasta gained 1.5 to 1.8%.

Unilever moved up after launching the second and final phase of its substantial €1.5 billion share buyback program.

Sainsbury (J) ended down 2%. Diageo and Tesco lost about 1.4%% and 1.2%, respectively. AstraZeneca ended down 1% after a rating downgrade from Deutsche Bank.

In the German market, Zalando zoomed more than 10%. Siemens Energy surged 9.5%.

Commerzbank gained 4.2%. The head of Germany’s central bank said that authorities would take a “very close look” at UniCredit’s overtures to potentially buy the German bank.

Fresenius Medical Care, Continental, BMW, Volkswagen, Deutsche Bank, Fresenius, BASF, Daimler Truck Holding, Porsche, Infineon, Mercedes-Benz and Vonovia gained 1.5 to 4%.

In the French market, Teleperformance rallied about 3.5%. Renault, STMicroElectronics, ArcelorMittal, Michelin, Vinci, Unibail Rodamco, AXA, Publicis Groupe, Bouygues, Vivendi, Dassault Systemes, Thales and Saint-Gobain ended higher by 1 to 2.3%.

Worldline shares plummeted 14.4% after the payment group announced the departure of its CEO Gilles Grapinet and cut its 2024 revenue and core earnings guidance.

On the economic front, Eurozone industrial production declined in July but at a slower-than-expected pace due to the rebound in non-durable consumer goods output, data from Eurostat revealed.

Industrial production fell 0.3% on a monthly basis in July after remaining flat in June. Output was forecast to decrease 0.6%.

France’s inflation eased more than estimated in August and reached the lowest since July 2021, revised data from the statistical office INSEE showed.

Consumer prices posted an annual increase of 1.8% in August, following a 2.3% rise in July. The August rate was revised down from 1.9% and marked the weakest since July 2021.

At the same time, the EU harmonized inflation softened to 2.2% in August, in line with flash estimate, from 2.7% in the previous month. On the other hand, core inflation increased to 1.7% from 1.5% in July.

Monthly CPI inflation advanced to 0.6%, which was revised up from 0.5% and follows 0.2% in July. The HICP grew by an unrevised 0.6% after a 0.2 percent rise.

UK inflation expectations slowed slightly in August, the latest quarterly Inflation Attitudes Survey conducted by Ipsos on behalf of the Bank of England revealed. The one-year ahead inflation expectations eased slightly to 2.7% from 2.8% in May.

However, in five years’ time, inflation is seen at 3.2%, up from 3.1% the prior survey period. Respondents assessed the current inflation at 5.2% compared to 5.5% in the previous survey period.