European stocks gain as investors await US inflation, Fed decision

European shares rose on Wednesday, buoyed by a decline in eurozone bond yields ahead of the release of key US inflation data and the outcome of the Federal Reserve’s policy meeting later in the day.

The pan-European STOXX 600 index gained 0.5 per cent as of 0837 GMT, rebounding after two sessions of declines amidst uncertainty surrounding French politics.

Investors are eager to gauge signals from the Federal Reserve regarding potential rate cuts this year, according to Altaf Kassam, EMEA head of investment strategy and research at State Street Global Advisors. They are particularly interested in assessing inflation trends and their implications for Fed rate cut projections.

Most sectors traded higher, with European lenders leading the gains with a 1.3 per cent increase, while automobile stocks lagged behind with a 1 per cent drop.

European equities had reached record highs following the European Central Bank’s rate cut but retreated due to domestic political turbulence and strong US job data, dampening hopes of an immediate Fed rate cut.

The Fed is expected to maintain rates, but investors await insights into future rate-cut forecasts. Market expectations suggest one or two rate cuts this year, down from the three projected in March.

Inflation in Germany accelerated last month due to higher service prices, with the country’s DAX index rising by 0.5 per cent.

However, some stocks faced challenges, as Umicore shares dropped 5.7 per cent after the company issued a profit warning amidst a slowing electric vehicle market.

Legal & General shares fell 3.4 per cent after disappointing investors with plans for a £200 million ($255 million) share buyback and an investment unit merger.

On the positive side, Rentokil Initial surged 12 per cent following reports of Nelson Peltz’s Trian Fund Management acquiring a significant stake in the British pest-control firm.

Attribution: Reuters.