By Ankika Biswas and Bansari Mayur Kamdar
(Reuters) -European shares hit a more than two-month high on Thursday, ending November sharply higher, after data showing a drop in inflation in the U.S. and Europe boosted bets that central banks will soon be cutting interest rates.
The pan-European STOXX 600 closed 0.5% higher, posting its biggest monthly jump since January, with rate-sensitive real estate and technology stocks jumping 14.7% each for the month.
Euro zone data showed inflation slowed to 2.4% year on year in November from 2.9% in October, well below expectations of a fall to 2.7%, while in the U.S. the annual increase in inflation was the smallest since early 2021.
Traders moved to fully price in the first 25 basis point interest rate cut in April in derivatives markets, while euro zone bond yields marked their biggest monthly drop in a year.
"There's this tension around inflation and growth," said Richard Flax, chief investment officer at Moneyfarm.
"Inflation on the margin is coming in a little bit lower than consensus forecast, but growth is a bit mixed."
Meanwhile, Italy's benchmark stock index touched a fresh 15-year high, up 0.2%, jumping 25.5% so far in 2023 and outperforming the STOXX 600's 8.6% advance this year.
"We've seen bond yields drifting lower, helping some of the peripheral markets," Moneyfarm's Flax said.
"Italy relatively from a macro perspective, is highly indebted and so relief on the yield side perhaps has a larger impact on financial assets in that market."
The banks-heavy IBEX in Spain was subdued after scaling its highest level since 2018, following a rally of 22.2% so far this year.
For the day, energy stocks rose 1.0% as oil prices climbed in anticipation of the outcome of an OPEC+ meeting.
Data showed German retail sales rose more than expected in October, while the number of unemployed people in Germany rose in line with expectations in November.
Germany's benchmark stock index gained 0.3%.
Dutch insurance company ASR jumped 13.0% to top the STOXX 600 after announcing a final settlement with interest groups concerning unit-linked products for an amount well below expectations.
Peer NN (NASDAQ:NNBR) Group jumped 9.9%, while the insurance sector gained 1.1%.
Eurazeo (EPA:EURA) climbed 9.7% after the French investment company set out strategic objectives for 2024-2027.
VAT Group rose 4.5% after JP Morgan upgraded the Swiss specialist valve maker to "overweight" from "neutral", while Swiss engineering group ABB (ST:ABB) gained 1.8% after unveiling higher sales and profitability targets.
Elekta shed 7.5% after Barclays initiated coverage on the radiation therapy equipment maker with "underweight" rating.