European stocks surged to record highs fueled by automotive and banking sectors, reacting to US inflation data, sparking speculation on a June Federal Reserve rate cut.
The STOXX 600, a benchmark pan-European index, notched a 1% gain, closing at 506.52 points, despite trimming gains post-US consumer price data.
February saw a notable rise in the US inflation rate, driven by increased gasoline and housing costs.
However, the core annual inflation rate, excluding the volatile sectors of food and energy, marked its lowest uptick since May 2021.
Market players continue to anticipate the Fed’s monetary policy adjustment in June, undeterred by the inflation report.
Stuart Cole, Equiti Capital’s chief economist, suggested the market might find some relief in the mild softening of core inflation.
Expectations of the European Central Bank (ECB) commencing rate cuts in June, following a slowdown in Eurozone inflation, have propelled the STOXX 600 to new heights in 2024.
Frankfurt’s DAX index also recorded a historic closing high, buoyed by Germany’s decreased inflation rate to 2.7% in February.
Cole speculates the ECB might lead to interest rate cuts.
Nonetheless, he expresses caution regarding the Fed’s approach, emphasizing their heightened vigilance against underestimating inflation.
Significant gains were seen across major European markets, with French blue-chip stocks and the UK’s FTSE reaching all-time highs.
The automotive index surged 2.4%, driven by an 11.5% rise in Porsche shares, signaling strong investor confidence post-financial results.
Banking stocks, sensitive to rate changes, surged 1.9%, marking their highest daily percentage gain in five months.
Major European stock indices in London, Frankfurt, Paris, Milan, and Madrid rose, except for Lisbon’s PSI20 index, which declined slightly.
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