European stocks hit a one-week high; focus on a possible fiscal reversal in the UK

Oliver2022-10-14

European shares rose on Friday as hopes grew of a reversal in some fiscal measures announced by the UK government, with investors also snapping up battered stocks amid concerns over economic growth and its impact on corporate profits. businesses.

The regional STOXX 600 index rose 1.2% at 0801 GMT, hitting its highest level since Oct. 7. Stocks in the region took inspiration from a positive Wall Street finish overnight.

U.S. stocks closed more than 2% higher on Thursday, buoyed by technical support and short hedging, even as a scorching consumer price index report bolstered the case for a the Federal Reserve’s fourth consecutive rate hike of 75 basis points next month.

Friday’s gain also put the STOXX 600 on course for a weekly rise, erasing losses incurred in the first three days of the week due to recession fears.

« Perhaps you have a hedging and batting position going on, » said Michael Brown, head of market intelligence at Caxton.

« That will likely be relatively short-lived, given the rate pricing we’re seeing and given that inflation data will only serve central banks to maintain or even become more aggressive in terms of hawkish stances. »

European Central Bank (ECB) Vice President Luis de Guindos said the central bank was prepared for a possible technical recession associated with high inflation, which must be reduced to maintain market confidence.

Meanwhile, speculation of a U-turn in UK fiscal plans further boosted sentiment. Britain’s Finance Minister Kwasi Kwarteng has cut short his trip to Washington to return early to London, where pressure is mounting for the new government to abandon an economic policy that has sparked turmoil in financial markets.

The Financial Times newspaper reported that the British government could reverse up to 24 billion pounds ($27.05 billion) in tax cuts. London’s FTSE 100 index gained 0.9%.

The focus is also on the third-quarter earnings season, with major U.S. banks across the Atlantic due to report results later in the day.

All of the STOXX 600 sector indices rose, led by a 2.2% jump in utilities.

Temenos fell 19.8% after the Swiss banking software group slashed its forecast for 2022, saying banks had become more cautious in their decision-making amid macroeconomic uncertainty and costs were rising.

UPM-Kymmene added 4.7% after the Finnish forestry company reported higher third-quarter results and said it expected 2022 adjusted EBIT to improve compared to 2021. (1 $ = 0.8872 pounds) (Report by Devik Jain in Bengaluru; edited by Uttaresh.V and Subhranshu Sahu)

financialpost

Oliver2022-10-14