European shares rise; China's COVID surge quells risk appetite

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 20, 2022. REUTERS/Staff

By Bansari Mayur Kamdar and Shreyashi Sanyal

(Reuters) - European shares closed higher on Thursday, with technology stocks leading gains, buoyed by Wall Street cheer after U.S. jobless data eased concerns about the Federal Reserve's aggressive tightening cycle.

The region-wide STOXX 600 rose 0.7%. For the year so far, it has fallen nearly 12% as investors head into 2023 in a wary mood.

"Investors are going into 2023 with a cautious mindset, prepared for more rate hikes, and expecting recessions around the globe. The bar is low but arguably reasonably so," said Craig Erlam, senior market analyst at OANDA.

Rate-sensitive European tech shares jumped 2.0%, boosting the main index, as euro zone government bond yields fell.

Risk-taking strengthened after data showed signs of a cooling in the U.S. labor market, easing concerns about an aggressive Federal Reserve tightening cycle.

Global markets resumed a rally set off earlier this week after Beijing's move to further relax COVID curbs, but worries remained about the impact of surging infections on any recovery in the world's second-largest economy.

The scale of the outbreak and doubts over official data prompted the United States, India, Italy, Taiwan and Japan to impose new travel rules on Chinese visitors. The European Union's Health Security Committee called an urgent meeting in Brussels to coordinate the bloc's response.

European miners fell 0.4%, making it the only major sector in the red, as it tracked base metal prices that reflected concerns about demand recovery in top consumer China.

"Not sure consumers in Europe have yet felt the full impact of inflation, so there could be more pain to come, and it may be harder for big brands to keep putting through price rises," Derren Nathan, head of equity research at Hargreaves Lansdown, said.

In Spain, data showed retail sales fell 0.6% in November from a year earlier, after rising 1.0% in October. Spanish stocks were flat.

In Germany, Europe's largest economy, exporters have modest hopes for next year, anticipating problems at major customers in China because of climbing COVID cases and rising prices making U.S. buyers cautious, the Federation of German Wholesale and Foreign Trade (BGA) said.

Miner Antofagasta (LON:ANTO) slid 2.1% after its Los Pelambres operation in Chile's Coquimbo region was hit by a blockade.

Ferrexpo fell 3.0% on the detention of its controlling shareholder, billionaire Kostyantyn Zhevago, by French authorities. The iron pellet producer said the detention was unrelated to matters at the company.

(The headline of this story has been corrected to say rise not slip)