Europe midday: Stoxx shrugs off German ZEW result with all eyes on Fed

17th Sep 2024 10:50

(Sharecast News) - European shares extended gains at midday on Tuesday, shrugging off a poor German business sentiment survey as investors looked ahead to the US Federal Reserve for a rate cut this week.

The pan-regional Stoxx 600 index was up 0.68% at 518.58 with all major bourses higher. German business sentiment deteriorated more than expected in September, according to a survey released on Tuesday by the ZEW Center for European Economic Research in Mannheim.

The indicator of economic sentiment fell to 3.6, down 15.6 from August's reading and well below expectations for a reading of 17.1, while assessment of the economic situation fell 7.2 points to -84.5. This marked the lowest since May 2020.

This had no impact on German shares whatsoever, with the DAX index up 0.8% and looking at fresh records.

"Never more is the phrase 'the stock market is not the economy' more relevant, with the DAX roughly 1% off record highs. While many are looking ahead to a period of strength as central banks start to become increasingly accommodative, the perception of Germany remains relatively unfavourable given policies that have let key industries such as car making slip to cheaper rivals in China," said Scope Markets analyst Joshua Mahony.

Meanwhile, investors are still betting on a hefty 50 basis point cut in US interest rates later the week when Fed policymakers meet on Wednesday.

"While markets remain certain of a rate cut at tomorrow's Fed meeting, the jury is still broadly split as to whether the reduction will be a quarter point or a half point," said Hargreaves Lansdown analyst Derren Nathan.

"US Bond yields were largely flat yesterday suggesting little change in opinion. There will be a few final pieces of the jigsaw for policy makers to digest later today, including US retail sales and industrial production."

Oil prices were above $73 as Hurricane Francine continue kept 12% of crude output shut down in the Gulf of Mexico.

In equity news, DIY chain owner Kingfisher gained more than 5% as it lifted the lower end of full-year profit guidance as half-yearly earnings rose.

Shares of Barry Callebaut surged by 7% % after Barclays raised the stock's rating to 'overweight' from 'underweight'.

Thule Group led the fallers as second-quarter revenue fell at the Swedish auto transport products maker, while debt rose.

Playtech slid as the British gambling technology firm finally agreed to sell its Italian unit Snaitech for €2.3bn, including debt, to betting company Flutter Entertainment.

Reporting by Frank Prenesti for Sharecast.com