PARIS (Reuters) – European markets ended sharply higher on Friday, supported by the latest U.S. indicators and encouraging results.
In Paris, the CAC 40 gained 1.27% to 7,724.32 points, while the German Dax gained 1.27% and the British Footsie 0.36%.
The EuroStoxx 50 index ended the session up 1.49%, compared to 1.02% for the FTSEurofirst 300 and 0.97% for the Stoxx 600.
Over the week, the CAC 40 rose by 0.63% and the Stoxx 600 by 1.54%.
Markets welcomed the latest CPI inflation figures released on Thursday, although Friday’s indicators somewhat nuanced the conclusions.
CPI inflation in June was indeed weaker than expected, while the University of Michigan sentiment survey showed on Friday that household inflation expectations continued to erode over the medium to long term, a key factor in moderating inflation.
The numbers follow a softer-than-expected jobs report last week, and both sets of data raise hopes that the Federal Reserve will cut rates in September.
Money markets estimate that there is a 90% probability that the central bank will lower its rates at this meeting.
Producer prices accelerated last month, however, raising concerns that inflationary pressures remain in the U.S. economy, although a narrower measure of these prices suggests they were flat on a monthly basis.
Furthermore, the results season has started in the United States as well as in Europe, and is helping to liven up the discussions.
“The earnings season started on a positive note, with the US reporting 4% sales growth and a 9% profit increase, while Europe posted 3% sales growth and a 6% profit increase,” said Florian Ielpo, head of macro research at Lombard Odier IM.
“This synergy of a more favorable than expected European earnings season, combined with lower valuations due to political risks, and potential rate cuts by the Federal Reserve, could catalyze a significant change, putting European stocks at the top of the list of the best performers of the quarter,” the economist even believes.
A WALL STREET
Wall Street is up mid-session, supported by the bond rebound and the slowdown in inflation.
At the time of the European closing, trading on the New York Stock Exchange indicated a rise of 0.76% for the Dow Jones, against 0.88% for the Standard & Poor’s 500, and 1.08% for the Nasdaq Composite.
VALUES
The rate-sensitive technology sector gained 1.73%, the best sector performer in the Stoxx 600, as markets anticipated an imminent rate cut in the United States.
Ericsson reported a smaller-than-expected drop in second-quarter revenue on Friday, gaining 4.15 percent.
Norwegian Air reported a better-than-expected quarterly profit on Friday, rising 7.76 percent.
Addtech climbed 14.98% to the top of the Stoxx 600, hitting a record high after reporting a profit above its first quarter level and providing guidance for the coming quarters.
EMS Chemie fell 4.73% after the Swiss nylon maker lowered its 2024 revenue forecast.
Axfood declined 8.61%, trailing the Stoxx 600, as its quarterly profit suffered from operational disruptions and the restructuring of its logistics.
Enel gained 1.41% after Jefferies raised its rating to “buy”, citing an encouraging outlook and an “unjustified” discount to its peers.
RATE
US short-term yields, which are more sensitive to rates, are declining after the latest CPI inflation figures, which are expected to encourage the Federal Reserve to cut rates in September.
At the close of the European rate markets, the yield on the ten-year Treasury was stable at 4.2003%, compared to a 3 bp decline for the two-year rate, at 4.4767%.
The yield on the German ten-year rose 2.5bp to 2.495%, while that of the two-year rate gained 1.9bp to 2.821%.
CHANGES
The dollar continued to decline, while the pound and the euro strengthened as investors expected the interest rate gap between the United States and the rest of the world to narrow.
The dollar declined 0.35% against a basket of benchmark currencies, while the euro advanced 0.33% to $1.0901 and the pound sterling advanced 0.55% to $1.298.
OIL
Oil is advancing as investors digest the latest US indicators which suggest that inflation is continuing to decline and that activity is normalising across the Atlantic.
Brent rose 0.39% to $85.73 per barrel, while American light crude (West Texas Intermediate, WTI) rose 0.61% to $83.12.
TO BE CONTINUED ON MONDAY:
(Written by Corentin Chappron, edited by Sophie Louet)
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