Europe midday: Stoxx up with all eyes on French, UK elections

3rd Jul 2024 11:17

(Sharecast News) - European stocks were higher on Wednesday amid hopes that a cut in US interest rates was in sight, while investors also eyed national elections in the UK on Thursday and France on the weekend.

The pan-regional Stoxx 600 was up 0.67% to 514.32, while France's CAC 40 rose 1.59% and Britain's FTSE 0.54%.

"Stocks have largely been driven upwards by hopes that interest rate cuts are on the horizon and a soft landing is in sight, thanks to encouraging comments from the chair of the Federal Reserve. Jerome Powell said that the US is back on a disinflationary path due to recent weaker inflation readings," said Hargreaves Lansdown analyst Susannah Streeter.

"He stressed that policymakers are wary of keeping monetary policy 'too tight for too long' and losing expansion in the economy."

Britons head to the polls with the ruling Conservatives facing a heavy defeat based on recent polls. The main opposition Labour Party has been at least 20 points ahead for months amid a cost-of-living crisis, the highest tax burden in 80 years and lowest living standards since World War 2.

"At this stage of the game anything other than a clear Labour majority would be more unsettling. Maintaining financial stability is set to be the priority for an incoming Labour government, and bond markets are sanguine, with gilt yields significantly lower than there were at the end of May and sentiment driven by the central bank rather than party policies," Streeter said.

In France, left and centrist parties are scrambling to find a way to stop the far-right National Rally party from gaining power in the second round of voting on Sunday after President Emmanuel Macron called a snap poll in response to gains made by the anti-immigrant group in recent European Parliament elections.

"With Macron's centrist group and a left-wing alliance withdrawing candidates to minimise the number of three-way contests that might split the anti Far-Right vote, we have seen French yields head lower and stocks on the rise," said Scope markets analyst Joshua Mahony.

In economic news, growth in the eurozone softened in June, a closely-watched survey showed on Wednesday, as a resurgent services sector failed to offset the slump in manufacturing.

The final HCOB Eurozone services PMI business activity index was 52.8, revised up from the flash reading of 52.6.

It means the service sector is continuing to grow, although the figure was down on May's 53.2 and a three-month low.

However, when combined with previously released data on the struggling manufacturing sector, the composite index fell sharply.

The HCOB Eurozone composite PMI output index was 50.9, still above the neutral 50.0 level but down on May's 52.2.

On the equities front, Uk sportswear retailer JD Sports Fashion fell on a downgrade from Barclays as the broker reduced its price target to 110p from 140p and re-rated the stock to "underweight", prompted by Nike's downbeat sales forecast after a weak final fiscal quarter.

Around half of JD Sports revenue is exposed to the US sportwear retail giant.

Reporting by Frank Prenesti for Sharecast.com