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European stocks scale 11-week high after soft U.S. inflation data

Published 11/10/2022, 03:36 AM
Updated 11/10/2022, 12:23 PM
© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 9, 2022.    REUTERS/Staff

By Shreyashi Sanyal and Ankika Biswas

(Reuters) -European shares clocked an 11-week closing high on Thursday as a slower-than-expected rise in U.S. consumer prices strengthened hopes of less aggressive interest rate hikes from the Federal Reserve going ahead.

The pan-European STOXX 600 jumped 2.8%, notching its biggest percentage gain in five weeks. All the sectors barring energy closed sharply higher, with rate-sensitive stocks at the forefront of the buying spree.

Europe's technology and real estate sectors skyrocketed 7.6% and 6.4%, respectively, marking their best day in over two years.

A U.S. Labor Department report showed consumer prices rose less than expected in October, pushing the annual increase below 8% for the first time in eight months. This signalled that inflation was starting to subside, which would allow the Fed to dial back its hefty interest rate hikes.

"This feeds into the sentiment that the unemployment rate creeping up is moving in line with the smaller CPI data. We'll see if the Fed pivots at some point, hoping sooner rather than later," said Daniela Hathorn, market analyst at Capital.com. "The facts are against 75 bps (in December) now."

The Euro STOXX volatility index slid to a 12-week low of 21.31 points, reflecting easing anxiety among investors.

The STOXX 600 index is now on track for its fourth straight week of gains, as hopes of a less aggressive stance by the U.S. central bank in its fight against inflation and a better-than-expected earnings season offset worries of a recession in Europe.

Further, a European Central Bank board member noted that the bank has raised the amount of bonds it can lend against cash to 250 billion euros ($254 billion) to ease a market squeeze that tends to get worse towards the end of the year.

Among single stocks, AstraZeneca (NASDAQ:AZN) gained 2.9% as it raised its full-year adjusted earnings forecast after beating expectations for quarterly profit and revenue.

Allianz (ETR:ALVG) gained 5.9% as the German insurer gave a more optimistic full-year outlook after reporting a better-than-expected 17% rise in third-quarter net profit.

Germany's Delivery Hero surged 18.6%, to top the STOXX 600, after it reassured investors about achieving an adjusted core profit margin in 2023 and upgraded its outlook for this year.

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 9, 2022.    REUTERS/Staff

Meanwhile, the energy sector slipped 0.4% as oil prices extended losses for the fourth consecutive day as renewed COVID-19 curbs in China raised concern about fuel demand in the world's biggest crude importer.

($1 = 0.9838 euro)

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