European shares edged higher on Thursday after a strong rally in the previous session on signs of U.S. inflation cooling, while Aegon climbed after the Dutch insurer raised its full-year forecast.
The pan-European STOXX 600 index (.STOXX) rose 0.1%, after clocking its best session in nearly two weeks on Wednesday on bets that a softer-than-expected U.S. inflation reading would encourage the Federal Reserve to become less aggressive on interest rates hikes.
“Even if European stocks are not rallying as some of their counterparts today, they’re going up as the interpretation by markets is that the inflation numbers were synonymous with the Fed changing its policy,” said Sebastian Paris-Horvitz, head of research at La Banque Postale Asset Management.
Money markets are pricing in over a 60% chance of a 50 bps hike from the Fed at next month’s meeting.
Oil stocks (.SXEP) led gains as crude prices rose by over 1% after the International Energy Agency raised its oil demand growth forecast for the year.
Healthcare shares led losses (.SXDP), dragged by declines in GSK (GSK.L), Sanofi (SASY.PA) and Haleon (HLN.L) amid growing concerns about U.S. litigation focused on a heartburn drug that contained a probable carcinogen. read more
Miners (.SXPP) also fell 0.8% on weak results from Antofagasta (ANTO.L). The company’s shares declined 2.2% and dragged peer Rio Tinto (RIO.L) down 3.7%.
The STOXX 600 is down about 10% so far this year, compared with a more than 11% decline for Wall Street’s S&P 500 index (.SPX). U.S. equities are heavily dependent on moves in big technology stocks, which fell sharply in the first half of the year on worries over rising interest rates.
“The big decline in global markets in the first quarter was associated with big growth stocks in the U.S. falling, and therefore Europe, which is less heavy on those, outperformed,” Paris-Horvitz added.
Still, Europe is struggling with the fallout of the war in Ukraine as it looks to source energy from non-Russian sources.
Germany, often referred to as the European Union’s economic engine, is also struggling with scant rainfall. Low water levels on the Rhine, Germany’s commercial artery, have disrupted shipping and pushed freight costs up more than five-fold.
Among stocks, Aegon (AEGN.AS) jumped 8.9% after raising forecasts for full-year operating capital generation and 2021-2023 free cash flow. Zurich Insurance Group (ZURN.S) added 1.7% as it reported a better-than-expected profit gain in the first half.
Siemens (SIEGn.DE) gained 0.7%. The engineering group said it continued to see strong industrial demand during its third quarter, but a writedown at Siemens Energy (ENR1n.DE) resulted in its first quarterly loss in nearly 12 years.