17 Jan. (Reuters) – European stocks reversed early losses on Tuesday to close at a new nine-month high after a report said European Central Bank policymakers were considering a slower pace of rate hikes.
Markets were under pressure for most of the day after data showed China posted its weakest annual economic growth in nearly half a century in 2022 and Wall Street bank Goldman Sachs (GS.N) reported a quarterly profit that fell below estimates. lay.
The pan-European STOXX 600 (.STOXX) closed 0.4% higher, its strongest level since April 22, with mining stocks (.SXPP) and food and beverage stocks (.SX3P) leading gains.
While the 50 basis point move signaled by ECB President Christine Lagarde in February remains likely, the prospect of a smaller 25-point hike at the next meeting in March is gaining support, Bloomberg News reported.
“It’s definitely been positive for equities,” said Stuart Cole, chief macroeconomist at Equiti Capital in London.
He added that “…it makes sense for the ECB to at least assess the appropriateness of Lagarde’s message. Since then we have seen energy prices – especially gas – fall, and in turn inflationary pressures have softened from the expected”.
The pan-European benchmark Stoxx index is up almost 7% in an optimistic start to the year, boosted by hopes of a recovery in the Chinese economy, easing price pressures and rising expectations of a milder-than-expected recession.
Data from Tuesday showed that German inflation declined further in the last month of 2022, confirming preliminary data.
However, the German trade association BDI warned that the economy is expected to contract by 0.3% this year as the energy crisis would continue to weigh on industry in Europe’s largest economy.
LVMH (LVMH.PA) rose 0.6% to hit an all-time high, giving the luxury goods group a market cap of 400 billion euros ($434 billion) for the first time and solidifying its lead as Europe’s most valuable company.
“Luxury stocks as a group are generally quite heavily exposed to China and Chinese consumer spending,” said Mike Bell, global market strategist at JP Morgan Asset Management.
“So the China reopening story and those accrued savings are probably a pretty big part of that.”
The UK blue-chip FTSE 100 (.FTSE) fell 0.1%, but hovered just below its all-time high of 7,903.50.
Ocado Group (OCDO.L) fell 9.3% after its online joint venture Ocado Retail warned it would not return to profit until the second half of the fiscal year as even its typically more affluent customers feel pressure from higher inflation and energy bills.
French energy company Engie (ENGIE.PA) fell 5.5% after BofA Global Research downgraded its stock to “underperform”.
Reporting by Bansari Mayur Kamdar, Ankika Biswas and Sruthi Shankar in Bengaluru; Edited by Sherry Jacob-Phillips and Emelia Sithole-Matarise
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