PARIS (Reuters) – European markets ended slightly higher on Thursday, supported by the latest U.S. monetary policy developments and U.S. data, although political uncertainty remained.

In Paris, the CAC 40 gained 0.71% to 7,627.13 points, while the German Dax rose 0.72% and the British Footsie rose 0.36%.

The EuroStoxx 50 index ended the session up 0.43%, compared to 0.61% for the FTSEurofirst 300 and 0.65% for the Stoxx 600.

Lower-than-expected inflation has pushed down sovereign yields and supported risky assets, with investors now positioning for two rate cuts from the Federal Reserve this year.

Over the year, the CPI index increased by 3.0% in June after 3.3% in May, while economists had expected an increase of 3.1%.

“The June figures are surprisingly benign and should help to strengthen the confidence of members of the Fed’s Monetary Policy Committee that inflation is returning to its target,” ING analysts said.

“The Fed wants to avoid a recession and achieve a ‘soft landing,’ and the Jackson Hole conference at the end of August could provide an opportunity for the Fed to signal more explicitly that interest rate cuts are coming,” the economists add.

Market attention will now turn to second-quarter corporate results from the US, with figures from JPMorgan Chase, Citigroup and Wells Fargo due on Friday.

In the eurozone, investors will begin to position themselves for the next meeting of the European Central Bank on Thursday, July 18. The institution is expected to maintain its rates at their current levels, but could comment on the evolution of inflation in the eurozone, which seems more persistent than expected.

British assets also benefited from a better-than-expected GDP figure in May, although comments from the Bank of England’s chief economist suggested rates could fall a little later than markets had hoped.

RATE

US yields are down sharply after the latest inflation figures.

At the close of the European rate markets, the yield on the ten-year Treasury fell by 10.1 bp to 4.1791%, compared to 13.5 bp for the two-year rate, at 4.4983%. The yield on the German ten-year dropped by 66 bp to 2.47%, while that of the two-year rate fell by 9.9 bp to 2.8%.

A WALL STREET

Wall Street was hesitant at mid-session, with the latest inflation figures supporting risk assets, although the start of the earnings season is tempering investor optimism.

At the time of the European close, trading on the New York Stock Exchange indicated a rise of 0.23% for the Dow Jones, against a fall of 0.8% for the Standard & Poor’s 500, and of 1.26% for the Nasdaq Composite.

VALUES

The rate-sensitive utilities and real estate sectors welcomed the U.S. figures, rising 1.78% and 1.91% respectively.

Vivendi advanced 5.09%, leading the CAC 40, after JPMorgan placed the stock on its “positive watch” list.

Alstom rose 3.7% after JP Morgan resumed its monitoring of the stock with an “outperform” recommendation, down from “neutral”.

Biotech group Evotec fell 2.42% after Deutsche Bank downgraded its rating to “hold”.

Pennon, the water distribution group, has appointed a new financial director and gained 11.23%.

Ambu gained 4.74% as the Danish medical equipment maker raised its full-year outlook.

Galp Energia fell 2.41% after Morgan Stanley downgraded its recommendation to “underweight”.

DNB, Norway’s largest bank, reported quarterly net profit of 10.77 billion Norwegian crowns ($1.01 billion) on Thursday, beating expectations and rising 5.85 percent.

Swiss chocolate maker Barry Callebaut, which reported results for the nine months to May on Thursday, fell 11.76 percent, the last in the Stoxx 600, as investors worried about the impact of high cocoa prices.

CHANGES

The pound strengthened after the latest economic data, while the dollar fell as investors bet on a narrowing of the interest rate gap between the United States and the rest of the world.

The dollar lost 0.63% against a basket of benchmark currencies, while the euro gained 0.32% to $1.0865. The pound strengthened by 0.52% to $1.2912.

OIL

Oil is moving moderately higher, split between the latest CPI inflation figures and data from the Energy Information Administration, which showed a decline in US crude inventories last week, and the latest report from the International Energy Agency (IEA) which signals a slowdown in oil demand in 2024 and 2025.

Brent rose 0.51% to $85.51 per barrel, while US light crude (West Texas Intermediate, WTI) rose 0.61% to $82.6.

(Written by Corentin Chappron, edited by Sophie Louet)

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