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European stocks continue post-Fed rally; H&M sales disappoint

Published 15/12/2023, 09:12
Updated 15/12/2023, 09:12
© Reuters. - European stock markets edged higher Friday, continuing the post-Fed rally even after the more cautious stances from the European Central Bank and the Bank of England. 

At 03:05 ET (08:05 GMT), the DAX index in Germany traded 0.4% higher, the CAC 40 in France traded up 0.4% and the FTSE 100 in the U.K. rose 0.2%.

Fed optimism remains

Both the European Central Bank and the Bank of England kept their interest rates unchanged on Thursday, as widely expected, but they also maintained plans to keep policy tight well into next year to combat inflation, which still remains above target.

The ECB said policy easing was not even brought up in a two-day meeting, the BOE said rates would remain high for "an extended period," and Norway's central bank even hiked rates.

This contrasted with the Fed's pivot towards rate cuts, but sentiment remains bullish amid hopes the dominant U.S. economy will achieve a soft landing next year, dragging the rest of the world’s economies higher.

European PMIs on slate

There’s plenty of economic data in Europe due Friday to guide the thinking of investors as the week comes to an end, and the festive period draws near.

French consumer prices fell 0.2% on the month in November, an annual rise of 3.5%, and the equivalent data from Italy is also scheduled.

December PMI data for France, Germany, the U.K. and the eurozone as a whole are also due, and should provide a hint of the likelihood of a regional recession to end the year.

There was some positive news out of China earlier Friday, as industrial production grew 6.6% year-on-year in November, more than expected and indicating some resilience after the country’s post-COVID economic rebound largely failed to materialize this year. 

That said, China slid further into disinflation in November, while business activity remained weak and retail sales grew by less than expected.

H&M reports drop in sales

In corporate news, H&M (ST:HMb) stock fell 0.4% after the world’s second-biggest fashion retailer reported a 4% drop in September-November sales measured in local currencies, the biggest decline since the third quarter of 2022.

H&M has been losing ground to Zara owner Inditex (BME:ITX), which on Wednesday reported a 15% rise in local-currency sales for the nine months through October, and a 14% rise for the following six weeks.

Crude set for first weekly gain in two months

Oil prices edged higher Friday, on course for the first weekly gain in two months, boosted by increased optimism over demand growth next year as well as a weaker dollar.

By 03:05 ET, the U.S. crude futures traded 0.2% higher at $71.69 a barrel, while the Brent contract climbed 0.1% to $76.69 a barrel. 

Both benchmarks are on track for gains of around 1% this week, breaking a run of seven consecutive losing weeks.

The dollar fell to a four-month low on Thursday after the Federal Reserve signaled lower borrowing costs next year, helping confidence that a stronger U.S. economy will boost crude demand in 2024. 

The International Energy Agency added to this belief by lifting its oil demand forecast for 2024, citing an improvement in the outlook for U.S. demand and lower oil prices.

A weak dollar also makes dollar-denominated oil cheaper for foreign purchasers.

Additionally, gold futures rose 0.4% to $2,052.05/oz, while EUR/USD traded 0.1% higher at 1.0997.


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