European shares jump as luxury stocks, miners rally amid Fed pivot hopes

By Shreyashi Sanyal

(Reuters) -European shares jumped on Tuesday, boosted by miners and luxury stocks, amid rising hopes that the U.S. Federal Reserve would slow down the pace of its interest rate hikes next month.

The pan-European STOXX 600 index rose 1.2% by 0905 GMT, kicking off November on a solid footing and hovering at their highest in more than six weeks.

The EURO STOXX 50 index gained 1.2% after luxury giants including LVMH, Kering, Hermes International and Pernod Ricard jumped between 2.2% and 3.9%.

Rumours based on an unverified note circulating on social media that China was planning a reopening from strict COVID curbs in March triggered a rush to such luxury names, which have major exposure to China.

“There are social media reports on China easing its zero-COVID policy and look at how much relief it has brought to markets starved for some good news out of China,” said Giles Coghlan, chief market analyst at HYCM.

Miners in Europe leapt 3.0% while oil & gas stocks added 1%, as prices of oil and industrial metals rose against declines in the dollar. [O/R] [MET/L]

Global equity markets braced for the Fed’s two-day policy meeting, with investors pricing in a 75-basis-point increase to its lending rate on Wednesday, but hopes remain the central bank will deliver a smaller 50-bp increase in December.

“All eyes are on the Fed, so I am expecting markets to cage up today… If the Fed surprises with a more dovish stance then I’m expecting a strong move higher in risk assets and the dollar to move much lower,” Coghlan said.

A better-than-expected earnings season has recently helped pull the STOXX 600 higher, but worries remain about the euro zone slipping into a recession as the European Central Bank promised more monetary policy tightening to combat record high inflation.

ECB President Christine Lagarde said the central bank must keep raising interest rates to fight off inflation even if the probability of a euro zone recession has increased. The ECB had doubled its deposit rate to 1.5% last week.

Among other stocks, Italy’s Monte dei Paschi di Siena rose 5.3% as it said it’s up to 2.5 billion euro ($2.5 billion) capital increase had been 93% covered so far.

Dutch specialty chemicals maker DSM dropped 1.1% as it lowered its 2022 profit outlook.

(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Subhranshu Sahu)