European shares gain on hopes of end to Fed rate hikes, China stimulus

By Matteo Allievi and Amruta Khandekar

(Reuters) -European shares rose on Tuesday as investors hoped the U.S. Federal Reserve was nearing the end of its interest rate hiking cycle, while China’s policy measures to prop up its battered real estate sector also boosted sentiment.

The pan-European was up 0.2% by 8:33 GMT, steadying further from last week’s sharp declines after notching similar gains on Monday.

Several Fed officials have signalled the U.S. central bank was nearing the end of its rate hiking cycle, with markets now awaiting key data on U.S. consumer prices due on Wednesday for more clarity on whether there has been a considerable slowdown in inflation.

Miners were the top sectoral gainers in Europe, up 1.2% as metal prices rose on a weaker dollar.

Meanwhile, China extended until the end of 2024 some policies in a November rescue package to shore up the real estate sector, helping lift sentiment.

“The largest economy in the world is arriving towards peak rates and at the same time there’s hope the second largest economy is getting more stimulus. That’s creating a relatively upbeat mood,” City Index strategist Fiona Cincotta said.

If there was a “surprise” on Wednesday over inflation numbers, “it would be to the upside on core inflation,” Cincotta said.

Shares of China-exposed luxury firms including LVMH, Hermes and Richemont rose between 1.3% and 1.5% while industrial stocks are also sensitive to China advanced 0.4%.

Helping the construction sub-index, Ireland-based Kingspan climbed 12.0% on forecasting record profit for the first half of the year.

However, UK’s lagged other European bourses as a firm pound pressured the exporter-heavy index after data showed robust wage growth in Britain.

Among individual companies, shares of Nordic Semiconductor reversed course to rise 5.0% after the chipmaker beat second quarter earnings estimates.

Daimler (OTC:) Truck gained 1.2% after the German automaker raised its profit and revenue guidance on easing of supply chain constraints.

After final data showed German inflation rose in June, interrupting a steady decline since the start of the year markets will await data on the ZEW economic sentiment index for July, expected to fall from the previous month.