European shares rise after Fed fuels rate cut hopes; ECB minutes awaited
(Reuters) – European shares were set to snap four days of losses on Thursday, after U.S. Federal Reserve Chair Jerome Powell’s dovish comments cemented hopes of an interest rate cut this month, even as trade frictions between France and the United States rose.
While strong U.S. jobs data last week led investors to trim bets of a 50 basis points rate cut by the Fed in July, Powell’s remarks saw interest rate futures pricing in greater odds of an aggressive rate cut this month.
The pan-European stocks benchmark rose 0.3% on broad-based gains after accumulating losses of 1.4% over the last four sessions. The release of Powell’s prepared remarks had lifted stocks briefly into the positive territory on Wednesday, but they closed lower.
Records from latest meeting of Fed policymakers showed heightening fears that a U.S.-China trade war was posing a serious risk of ending the economic expansion by pushing growth and inflation lower.
U.S. President Donald Trump on Wednesday ordered an investigation into France’s planned tax on technology companies, a probe that could lead to the United States imposing new tariffs or other trade restrictions.
Meanwhile, the European Central Bank is scheduled to release at 1130 GMT minutes of its last meeting when chief Mario Draghi took a sharp dovish stance, pushing stock markets higher.
“What we’re expecting is the ECB to continue point to downside risks to economic outlook in Europe, especially on the industrial and export oriented side, and risks stemming from weakened inflation expectations,” said Holger Schmieding, chief economist at Berenberg.
Data on Thursday showed annual inflation in the euro zone’s biggest economy accelerated in June, but remained below the ECB’s target.
“The ECB and the Fed are the two most systemically important central banks in the world… I would think that global markets are benefiting from them taking a suitably dovish tilt in the presence of fairly significant political risks.”
The STOXX 600 has recouped its May losses stemming from a sudden escalation in U.S.-China trade tensions, gaining around 6% since then, largely on expectations that major central banks will adopt a looser monetary policy.
Among stocks, Britain’s Reckitt Benckiser (RB.L) was among the biggest boosts after agreeing to pay up to $1.4 billion to resolve U.S. federal probes in connection with the sales and marketing of an opioid addiction treatment by its former prescription drugs business Indivior (INDV.L).
German pharma firm Gerresheimer AG (GXIG.DE) was the top gainer on the main index, up 8.8% after confirming revenue guidance for the year after posting strong second quarter results.
Energy stocks gained, tracking oil prices that hit six-week highs.
Meanwhile, Swiss stocks .SSMI underperformed as chemical company Sika (SIKA.S) slid 4.1% after a UBS downgrade to ‘sell’, while reinsurance group Swiss Re (SRENH.S) slipped after suspending plans for a $4.1 billion initial public offering of British life insurer ReAssure.
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