European Stocks Close Higher On Rate Cut Hopes

European stocks closed higher on Tuesday amid hopes major central banks will start reducing interest rates from early next year. However, gains were just modest in most of the markets in the region, as investors awaited some crucial European and U.S. economic data, including reports on inflation.

Sentiment was underpinned somewhat after San Francisco Fed President Mary Daly said cuts to the U.S. central bank’s benchmark rate are likely to be appropriate next year because of an improvement in inflation.

The Fed must make sure “we don’t give people price stability but take away jobs,” Daly told the Wall Street Journal in an interview.

The pan European Stoxx 600 gained 0.36%. The U.K.’s FTSE 100 climbed 0.31%, Germany’s DAX ended 0.56% up, and France’s CAC 40 edged up 0.08%. Switzerland’s SMI ended down 0.08%.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Poland, Russia, Spain and Sweden closed higher.

Norway, Portugal and Turkiye ended weak.

In the UK market, Fresnillo, Entain, Anglo American Plc and Flutter Entertainment gained 3 to 3.7%. Flutter Entertainment climbed 2.6% following a rating upgrade.

Antofagasta, Spirax-Sarco Engineering, Johnson Matthey and Standard Chartered ended higher by 2 to 2.6%.

Burberry Group ended down 2.25%, weighed down by a rating downgrade. St. James’s Place, BT, British Land Company and BP drifted down 0.8 to 1.2%.

In the German market, Sartorius rallied nearly 4%. Siemens and Zalando gained about 2.8% and 2.6%, respectively. Puma, Siemens Healthineers, HeidelbergCement and Merck climbed 1 to 1.5%.

Covestro gained more than 1% after reports that the Abu Dhabi National Oil Co was preparing to increase its takeover offer for the chemicals maker.

In Paris, WorldLine surged 6.75%. Teleperformance gained about 3%, and Eurofins Scientific climbed nearly 2.5%. Carrefour, Unibail Rodamco and Alstom ended higher by 1.3 to 2%.

Legrand ended down 1.7% and Stellantis closed lower by about 1.2%. Societe Generale, Bouygues, Capgemini, Orange and TotalEnergies also ended weak.

Final data from the statistical office Eurostat showed Eurozone inflation eased to the lowest in more than two years in November. The harmonized index of consumer prices posted an annual growth of 2.4% in November after a 2.9% gain in October. The rate was the lowest since July 2021 and matched the initial estimate released on November 30.

The Bank of France trimmed the French economic growth estimate for this year to 0.8% from 0.9%, but retained the projections for next two years. Gross domestic product is forecast to grow 0.9% next year and 1.3% in 2025. Growth is seen improving to 1.6% in 2026.

UK manufacturers expect output to rise in the first quarter of 2024 and selling price expectations hit the weakest in two years in December, data from the Confederation of British Industry showed.

Switzerland’s foreign trade surplus decreased to CHF 2.0 billion in November from CHF 3.4 billion in October, data from the Federal Customs Administration showed.

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