Prospects of rate cuts fuel the rise in European stocks

Following the release of softer American inflation data, European shares saw an increase on Friday, igniting anticipation of interest rate reductions by the US Federal Reserve. Despite higher than anticipated inflation numbers in the euro zone, anticipations for a rate slash in June remain unaltered.

In Dublin, the stock market experienced a decrease on the closing day of the week, with a 0.24% drop. High-profile companies such as Smurfit Kappa and Kingspan experienced a dip in value, causing the Euronext Dublin to decrease to 9,940 by the finalisation of the trading day. Stocks in Kingspan and Smurfit Kappa declined by 2.43% and 1.7%, respectively. However, shares of the Bank of Ireland and AIB saw a minor increase, and Ryanair finished in a positive light, adding almost 1% to its share price.

Conversely, Friday saw London stocks increase, marking the third consecutive month of gains. This was motivated by inflation figures from the US meeting expectations, sparking prospects of a September rate reduction by the US Federal Reserve. The prominent FTSE 100 index increased by 0.5%, and the FTSE 250, a mid-cap index, rose by 0.3%. Despite a decrease in overall weekly trading, both indexes posted their third straight month of gains. The energy infrastructure operator National Grid headed the FTSE 100 with a 4.7% increase.

Although general gains were noted, the construction and materials sector noted a 1% reduction, the most significant decrease among all sectors. Shares in JD Sports fell by 4.7% when the retailer did not change its profit outlook. However, the FTSE 250 index saw significant gains by luxury car marker Aston Martin, which increased by 4.7% following a report of the delay of its EV launch until at least 2026.

Despite suffering a second consecutive week of declines, the pan-European STOXX 600 closed 0.3% higher. Fears over consistent high interest rates caused a spike in euro zone bond yields, mirroring their US counterparts. Despite the weekly decline, the index posted a gain for the month.

Taking a glimpse at the performance of significant STOXX 600 divisions, it can be observed that most of them registered positive figures, spearheaded by the healthcare sector with an increase of 1.1%. However, a noticeable slump of 1.5% in technology equities somewhat curbed the overall progress. Airbus, one of the prominent stocks, experienced a downturn of 2% due to pressure encountered in their planned augmentation of passenger jets production, as per insiders’ claims. Capgemini, an IT solutions firm, saw a decline of 4.5% in response to a downgrade from two brokerage firms.

Over at New York, S&P 500 and NASDAQ, despite an initial surge, were set to terminate their five successive weeks of gains. Investors were assessing the timing of rate reductions by the Federal Reserve triggered by an inflation report largely consistent with projections. After barely positives openings, these indices stumbled to their lowest in two weeks. Key growth companies, namely Alphabet, Amazon.com and Nvidia, suffered losses ranging between 1.1% and 2.6%.

Conversely, Flutter Entertainment, owner of Paddy Power, observed a 1.74% upswing, as it announced a strategic relocation of jobs from Dublin and Romania alongside plans to primarily list on the New York Stock Exchange. Its recent headquarters relocation to the US appears to play into this strategy. In contrast to the rest, the blue-chip Dow performed relatively well, buoyed by healthcare equities. The healthcare sector in S&P 500 saw a healthy increase of 0.7%, along with a 1.2% increase in real estate.

High-profile shifts included Dell, who suffered a 22% plunge upon signalling potentially squeezed annual margins due to increased server construction costs catering to hefty AI workloads. Furthermore, Gap’s shares shot up 24.2% following ameliorated annual sale forecasts and an encouraging first-quarter performance, underlying progress in its revival plans. There was a 5.4% plunge in shares of Trump Media & Technology Group subsequent to Donald Trump’s guilty verdict in a New York court for document falsification to conceal a pre-2016-election illicit payment. Additional information provided by Reuters. All data © Thomson Reuters 2024.

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