European stocks rise on rate cut hopes, healthcare sector hits record high

Published On : 08/23/2024

By Ankika Biswas and Pranav Kashyap

(Reuters) -Europe’s main stock index climbed on Thursday, with healthcare and retail stocks leading the charge, while investors cheered growing prospects of interest rate cuts by major central banks and sifted through a wave of economic data globally.

The pan-European STOXX 600 index closed 0.4% higher, rising for the second day and closing at its highest level in this month.

The retail sector rose to the top, boosted by an 11% jump in JD Sports after the British sportswear retailer reported an improvement in second-quarter underlying sales growth.

Swiss pharmaceutical company Siegfried Holding advanced 7% after better-than-expected first-half results, while Biomerieux rose nearly 6% after UBS initiated coverage of the French biotechnology stock with a “buy”.

The healthcare sector hit a record high, also thanks to a 2.4% rise in Europe’s most valuable company by market value, Novo Nordisk.

With market participants broadly pricing in a 25-basis-point rate cut by both the Fed and the ECB in September, the occurrence of these could provide a fresh boost to risk assets globally.

The European Central Bank’s July meeting minutes showed policymakers saw no urgency in cutting rates but hinted at a fresh discussion in September due to growth concerns.

Different data sets showed euro zone business activity had surprising strength in August, potentially weakening expectations for two more rate cuts from the ECB, while last quarter’s slowing negotiated wage growth bolstered the case for a September rate cut.

“While further ECB cuts are on the way – we see cuts in September and December this year – the broader path is likely to be gradual and subject to considerable uncertainty,” said Chris Hare, senior economist at HSBC.

Investors also awaited policymakers’ commentary at Jackson Hole this week, hoping that the world’s most influential central bank, the U.S. Federal Reserve, will kick off its rate-cutting cycle next month.

Over in the U.S., weekly jobless claims ticked up but were steadying near levels consistent with gradual labour market cooling that should aid a September U.S. rate cut.

As for other individual stocks, Deutsche Bank rose 4% after announcing settlements with some plaintiffs in Postbank acquisition lawsuits.

Reinsurance company Swiss Re gained 4.5% after results, while CTS Eventim surged 6% after the German ticketing group raised its full-year earnings forecast.

Aegon fell 5.4% after the Dutch insurer booked a charge of around $400 million in the first half of 2024, while Danish hearing aid and audio solutions maker GN Store Nord dropped 9% after second-quarter results miss.

(Reporting by Pranav Kashyap and Ankika Biswas in Bengaluru; Editing by Savio D’Souza, Janane Venkatraman and Josie Kao)

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