EUROPEAN shares ended on a positive note on Friday (Jan 17), benefiting from a broad-based rally which was fuelled by declining government bond yields and encouraging economic data from China, with the Stoxx 600 logging its fourth straight weekly rise.
The benchmark index, which rose by 0.7 per cent, recorded a more than 2 per cent gain over the week, achieving its fourth consecutive week of advances, its longest winning streak since Aug 26 last year.
Most Stoxx sub-sectors were trading higher, with rate-sensitive sectors, like construction and industrials boosting the index, rising 1.6 per cent and 1.5 per cent respectively.
Meanwhile, data showed euro zone consumer inflation for December in line with expectations.
The European Central Bank’s Frank Elderson said it is not yet done lowering interest rates, but the timing and size of any future policy easing is not yet certain, Dutch newspaper Het Financieele Dagblad reported.
Euro zone benchmark German bond yields were on track for their first weekly drop since early December 2024.
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Investor confidence received an additional lift from China’s economic performance, which while aligned with the government’s target of 5 per cent growth for the previous year, was unbalanced. This also boosted the basic resources sector, which rose by 2 per cent.
UK’s FTSE 100 outperformed its continental peers, gaining 1.3 per cent to close at an all-time high.
British retail sales fell unexpectedly in December, adding to a run of downbeat economic indicators that are likely to further boost expectations for a Bank of England interest rate cut next month.
The only sector in the red was healthcare, which fell 0.8 per cent. Barclays said it was cautious on European pharmaceuticals and life sciences, predicting a challenging first-half of the year.
Throughout the week, European equities thrived as global markets responded favourably to a slowdown in US core inflation. This left the door open for potential interest rate cuts by the Federal Reserve, further enhancing market optimism.
Positive earnings from Cartier-owner Richemont on Thursday spurred a rally amongst luxury heavyweights such as LVMH, Kering and Swatch, giving a leg up to the broader index.
Looking ahead to next week, attention will shift to the inauguration of Donald Trump as President of the United States. Investors will be keenly watching for any new policy announcements, including the possibility of trade tariffs, which could have significant implications for Europe.
Meanwhile, Axel Rudolph, senior technical analyst at IG said asset allocation away from over-valued US mega stocks into lower price-to-earnings ratio, European shares amid a weak euro and sterling have propelled the region’s indexes to record highs.
Saab lost 5.3 per cent after the Swedish defence equipment maker reported fourth quarter results.
Avolta jumped 8.4 per cent after the Swiss duty-free retailer said it plans to buy back shares for the equivalent of 200 million Swiss francs (S$299.2 million) to cancel in the future. REUTERS
