Europe close: US CPI down, stocks up, Fed still to go

12th Jun 2024 16:49

(Sharecast News) - European shares gained as investors moved to price back in a first interest rate cut by the US Federal Reserve in September, even as they waited on the central bank's rate decision after the close of markets.

"The past few sessions had seen stock markets hit by several blows [...] But the afternoon has seen a classic risk-on move - stocks are up, and the dollar and volatility are both down," said IG chief market analyst Chris Beauchamp.

"Today's post-CPI reaction shows there is still plenty of money prepared to get behind further gains in equities, though the Fed meeting tonight could still be a trigger for more volatility."

The pan-regional Stoxx 600 was up 1.08% to 522.89 with all major bourses posting big gains.

That was also true for France's CAC 40, which added 0.97% to 7,864.70.

Euro/dollar meanwhile snapped back from its losses at the start of the week, climbing 0.97% to 1.0845.

Euro area government bond yields were lower, but gold and Brent futures higher.

Triggering the moves were slightly lower-than-expected readings for headline and core US consumer prices in May.

Back in Europe, the final reading on German inflation for May confirmed that annual price growth had picked up to a four-month high, with numbers in line with the preliminary estimate released two weeks ago.

The harmonised index of consumer prices, harmonised across all EU members for better comparisons, increased by 0.2% last month, easing from 0.6% growth in April, according to Destatis, matching the initial estimate on 29 May.

On the equities front, Rentokil surged to the top of the Stoxx on reports that activist investor Nelson Peltz's Trian Management has taken a significant stake in the pest control company.

Legal & General slumped after the UK insurer announced a £200m share buyback as it set out plans to restructure the business into three core units and promised to increase shareholder returns.