EUROPEAN stocks gained on Wednesday (Apr 3) after a softer-than-expected US services sector data, while investors also assessed softening eurozone inflation data that cemented the case for European Central Bank (ECB) interest rate cuts.
The continent-wide Stoxx 600 closed 0.3 per cent higher, recovering from a two-week intraday low. The index has been hitting record highs, with hopes of rate cuts this year and optimism around artificial intelligence buoying sentiment over the past two quarters.
Barclays raised its year-end target for the benchmark index to 540 from 510, turning bullish on the broader region on bets on easing borrowing costs, cheaper valuations and improving domestic growth.
Banks topped sectoral gainers, rising 1.4 per cent to hit their highest level since early 2018, while eurozone banks also gained 1.5 per cent.
An Institute for Supply Management survey showed US services industry growth slowed further in March, while a measure of prices paid by businesses for inputs dropped to a four-year low, boding well for inflation outlook.
Another set showed eurozone inflation fell unexpectedly last month.
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“It seems too early to conclude that the last mile of the disinflation process has been successfully conquered,” HSBC economists wrote.
“However, while one swallow might not make a spring, it certainly helps open the door to an ECB rate cut.”
Following the data, ECB policymaker Pablo Hernandez de Cos told a financial event in Barcelona that rate cuts could come in June.
While the ECB is expected to leave rates unchanged at its policy meeting next week, markets see a 71 per cent chance of a 25-basis-points rate cut in June.
As for other sectors, technology rose 0.9 per cent. A powerful earthquake in Taiwan raised concerns about disruptions to the vital chip-making industry, which had spearheaded much of the global rally in the previous quarter.
Among individual movers, Forvia climbed 5.4 per cent after upbeat analysts comments ahead of the European car parts maker’s first-quarter results due on Apr 18.
Italy’s FinecoBank gained 6 per cent after JPMorgan upgraded the online bank and brokerage firm to “overweight” from “neutral”, while German chipmaker Infineon rose 2.4 per cent on a Morgan Stanley upgrade to “overweight”.
Verbund lost 4.6 per cent after Stifel downgraded the Austrian utility firm to “sell” from “hold”.
Swiss Re dropped 3.6 per cent as the reinsurance firm is set to appoint its corporate solutions boss Andreas Berger as group chief executive, replacing long-serving CEO Christian Mumenthaler.
Meanwhile, Reuters reported Italy is set to lower its GDP growth forecasts this year and next amid a clouded economic outlook. However, Italian stocks rose 0.5 per cent, in line with regional peers. REUTERS
