Europe close: Stocks rise on rate-cut hopes after ECB minutes

22nd Aug 2024 16:59

(Sharecast News) - The Stoxx 600 gained on Thursday despite a barrage of mixed economic data, with the stocks resuming their recent rally on rising hopes that central banks in Europe and the US will move to cut interest rates in September.

The pan-European benchmark index rose 0.35% to 515.74, but earlier gains that saw the index reach 517.28 were trimmed by the close. Indices in London, Paris and Milan finished flat, but gains were registered in Frankfurt and Madrid.

The Stoxx 600 Index has now risen in 11 of the past 13 trading sessions, jumping 5.9% since 5 August.

The European Central Bank released the accounts of its July monetary policy meeting on Thursday. While the ECB kept rates unchanged at the meeting, the minutes showed the possibility an easing of monetary policy at its next meeting in September, with officials said to have an "open mind" to cutting interest rates.

"In our view, the data released so far this week - including the underwhelming flash PMIs and moderating figures for labour costs, negotiated wages and job vacancies - appear fully compatible with a further rate cut next month," according to analysts Chris Scicluna and Emily Nicol from Daiwa Capital Markets.

Sentiment was also lifted on Wednesday by the release of minutes from the most recent Federal Reserve policy meeting and a downward revision to labour-market data cemented expectations for an interest-rate cut in September.

Attention will now shift to the Federal Reserve's economic symposium in Jackson Hole, Wyoming, on Friday with chairman Jerome Powell expected to speak on the central bank's current opinion of the US economy.

Economic data in focus

Back in Europe, the composite purchasing managers' index (PMI) for the eurozone improved to 51.2 from 50.2, beating the 50.1 reading expected by analysts. However, data from economic powerhouse Germany painted a worrying picture.

Figures from HCOB released early on revealed that the economic downturn in Germany deepened this month, with the manufacturing PMI contracting more than expected while growth slowed in the services sector. The German overall composite PMI fell to 48.5 in August, from 49.1 in July, missing the 49.2 consensus estimate.

Nevertheless, "Once again, we have seen signs of economic distress from the German manufacturing sector, with the decline to 42.1 marking the lowest point in five months," said Joshua Mahony, chief market analyst at Scope Markets. "While the Paris Olympics helped drive a sharp uptick in French services sector activity, the data seen this morning does help strengthen the rhetoric around a potential weakness within the eurozone economy that the ECB will need to address,"

In the UK, the S&P Global flash PMI composite output index rose to 53.4 from 52.8 in July, hitting a four-month high and coming in above expectations for a reading of 52.9.

Market movers

London-listed sports apparel and footwear retailer JD Sports Fashion was a high riser, jumping nearly 11%. The company said it returned to like-for-like growth in its second quarter, with its store rollout programme in North America and Europe providing a boost, as it maintained its full-year profit outlook.

Swiss insurance giant Swiss Re was also performing well, rising 4.5% after beating forecasts with second-quarter profits and reiterating guidance for the full year.

German banking group Deutsche Bank gained 4% after reaching a deal with a large share of Postbank shareholders in a long-running legal case about the price paid for the rival bank during a 2008 takeover.

Also in Frankfurt, ticket service provider CTS Eventim jumped 6% after growth picked up in the second quarter, prompting a guidance upgrade.

The heavy faller on the Stoxx 600 was Danish group GN Store Nord, as the hearing aids, speakerphones, videobars and headsets maker underwhelmed with its second-quarter results, causing the stock to drop 9%.