European shares surged on Wednesday, closing 1.3% higher to snap a three-day losing streak, as an in-line US inflation reading raised the chances of a second rate cut by the Federal Reserve this year.
The STOXX 600 index jumped to 515.02 points, driven by a 3.3% gain in the real estate sector and a 2% increase in financial stocks. The news boosted investor confidence and led to a significant sell-off in European government bonds, which fell to 2.53%, snapping a 10-day rising streak.
The UK’s annual inflation rate of 2.5% in December was higher than expected, but lower than the 2.6% recorded in November. This data boosted British equities, with the FTSE 100 index closing 1.2% higher and the midcap index gaining 2.9%.
In France, consumer prices rose 1.8% year-on-year in December, while Spain’s EU-harmonised 12-month inflation rate rose to 2.8%. The German economy contracted for the second consecutive year in 2024.
The European Central Bank is expected to extend back-to-back interest rate cuts at least until July to shield the weak euro zone economy. Despite this, investors are optimistic about the future, with some seeing positive surprises on the corporate side, particularly in terms of earnings growth.
Source: https://www.reuters.com/markets/europe/european-shares-advance-bond-yields-ease-soft-inflation-powers-uk-stocks-2025-01-15