By Matteo Allievi and Shreyashi Sanyal
(Reuters) -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 U.S. inflation.
The pan-European STOXX 600 index ended 0.6% higher, extending gains to the fifth straight day, its longest winning streak in nearly three months.
Rate-sensitive technology stocks were the top gainers on STOXX 600, jumping 1.7%, with IT provider Softcat advancing 5.3% after Citi raised it to “buy”.
Also supporting STOXX 600 were miners rising 1.7%, as commodity prices won support from a weaker dollar. [O/R] [MET/l]
A faster-than-expected slowdown in U.S. inflation reinforced bets that the Fed could end its rate hikes soon after July.
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 U.S. also showed initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 237,000 for the week ended July 8, but overall the labor market remains tight.
Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, says the labour data adds credence to the theory that the rate of inflation can keep coming down even if the labour market remains 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.”
London’s FTSE 100 also edged 0.3% higher after a muted start. Britain’s economy shrank less than expected in May, suggesting a widely forecast recession was not already underway.
Among individual stocks, Britain’s largest homebuilder Barratt Developments dropped 1.6% after the company warned it would build far fewer homes this fiscal year.
Shares of Swatch rose 6.9% after the watchmaker reported record growth in the first half of the year.
(Reporting by Matteo Allievi in Gdansk and Amruta Khandekar and Shreyashi Sanyal in Bangalore; Editing by Sherry Jacob-Phillips, Janane Venkatraman, William Maclean)
