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European shares kick off November on bright note
Global Banking & Finance Review®
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By Shreyashi Sanyal and Ankika Biswas
(Reuters) -European shares gained on Tuesday, starting November on an upbeat note amid growing hopes that the U.S. Federal Reserve would slow down the pace of its interest rate hikes.
The pan-European STOXX 600 index rose 0.6% to hit a near seven-week closing high, with miners and retailers leading the gains.
Investors expect the U.S. central bank to raise its interest rates by 75 basis points 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, I’m expecting a strong move higher in risk assets and the dollar to move much lower,” said Giles Coghlan, chief market analyst at HYCM.
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.
Further, 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 luxury names, which have major exposure to China.
Luxury giants including LVMH, Kering, Pernod Ricard and Hermes International advanced between 1.9% and 3.0%.
Miners leapt 3.4%, while oil & gas stocks added 1.7%, as prices of oil and industrial metals rose against a weak dollar. [O/R] [MET/L]
“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,” Coghlan added.
The earnings season has also been largely supportive for markets. Out of the 163 STOXX 600 companies that have reported results so far, 58.3% exceeded analyst estimates, Refintiv data showed. In a typical quarter, 53% companies beat estimates.
Prosus NV jumped 9.3% after the technology investment firm denied a press report on a potential sale of its 28% stake in Chinese software and gaming giant Tencent.
Italy’s Monte dei Paschi di Siena rose 4.9% as it said its up to 2.5 billion euro ($2.5 billion) capital increase had been 93% covered so far.
Dutch specialty chemicals maker DSM dropped 4.0% as it lowered its 2022 profit outlook.
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Subhranshu Sahu and David Evans)
The STOXX 600 index is a stock market index that represents the performance of 600 large, mid, and small capitalization companies across 17 European countries.
Interest rate hikes refer to the increase in the central bank's benchmark interest rates, which can influence borrowing costs, consumer spending, and overall economic activity.
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in GDP, income, employment, manufacturing, and retail sales.
Monetary policy is the process by which a central bank manages the supply of money and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
Luxury goods are high-quality products that are not essential but are desired for their quality, exclusivity, and status, often including items like designer clothing, jewelry, and high-end electronics.
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