Europe: Shares near two-week highs on Fed rate cut expectations

EUROPEAN shares hit a near two-week high on Wednesday, underpinned by gains in heavyweight healthcare and technology stocks, as near-certain expectations that the US Federal Reserve will cut interest rates next month buoyed sentiment.

The pan-European Stoxx 600 index closed 0.54 per cent higher at 550.85.

European healthcare stocks were the strongest performing sector, with a 1.6 per cent rise. The sub-index logged its fifth session of gains, the longest streak since late May. Genmab was up 3.8 per cent while Bayer rose 3.2 per cent.

The technology sector bounced back from a three-month low hit in the previous session.

Bets on a September Fed rate cut rose after Tuesday’s tame US inflation data and with Treasury Secretary Scott Bessent saying there was a “good chance” of a 50 basis point cut. Markets now fully price in a 25 bp cut, CME’s FedWatch Tool showed.

“(Fed) Chair Jerome Powell is going to be influenced most importantly by the job and the inflation numbers… if it’s not September, you’ll see (a cut) shortly thereafter, because there’s a case for lowering at this point,” said Eric Schiffer, chief executive officer at private equity firm Patriarch Organization.

Germany’s DAX rose 0.7 per cent after three sessions of declines. German inflation eased to 1.8 per cent in July, confirming preliminary data from Europe’s biggest economy.

Schiffer said that European stocks were benfitting from momentum in the United States, where the benchmark S&P 500 index hit a record high on Wednesday.

US President Donald Trump said Ukraine must be involved in territorial talks with Russia, after a virtual meeting with European leaders on Wednesday, Trump and Russian President Vladimir Putin are due to discuss how to end the conflict in Ukraine, but Kyiv and its allies fear a deal could out Europe and Ukraine’s security interests.

Europe’s broader aerospace and defence index reversed earlier gains to close flat.

European company earnings have proven resilient, with LSEG I/B/E/S data on Tuesday showing that 54 per cent of companies reporting so far have beaten earnings.

Shares of German tank gearbox maker Renk rose 2 per cent after it reported better-than-expected second-quarter revenue, benefiting from increased European defence spending.

Nutrition supplement maker Glanbia was the best performer on the Stoxx 600 index, up 15.8 per cent, after increasing its full-year earnings outlook.

UK insurer Beazley dropped 12.3 per cent, its worst day since September 2020, and the biggest faller on the index, after it trimmed its annual premium growth forecast.

Sweden’s Evolution fell 8.5 per cent after a Bloomberg report said its casino games had been distributed in banned markets. REUTERS