Europe open: Shares up with eyes on US Fed, inflation

12th Jun 2024 07:57

(Sharecast News) - European shares started Wednesday on the front foot as investors digested stagnant GDP figures from the UK and awaited an interest rate decision from the US Federal Reserve after inflation data for May.

The pan-regional Stoxx 600 was up 0.41% to 519.38 with all major bourses higher. France's CAC 40 was up 0.29% to 7,812, while Germany's DAX rose 0.49% to 18,461.

Official UK data showed that economic growth flatlined in April as construction output declined for the third month in a row.

The monthly gross domestic product reading was in line with expectations, but was lower than March's 0.4% expansion and landed a blow on Prime Minister Rishi Sunak's already stuttering election campaign in which he has insisted that his economic turnaround plan was working.

However, the stagnant numbers, along with a rise in unemployment could also give Bank of England policymakers "more confidence that demand is being squashed out of the economy", said Hargreaves Lansdown analyst Susannah Streeter

"This keeps hopes alive for interest rate cuts this summer, and while June looks unlikely August is still a possibility."

Meanwhile, across the Atlantic, the Fed is expected to hold its benchmark overnight borrowing rate in a range of 5.25% - 5.5%. Traders will be keenly watching for any updates on economic projections for guidance on the path for policy given a recent strong jobs report and sticky inflation could mean rates stay higher for longer.

The latest US consumer prices index print is forecast to show just a 0.1% increase from April and a 3.4% rise on a year-over-year basis.

In Germany, the final reading of 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.

Reporting by Frank Prenesti for Sharecast.com