(Bloomberg) -- European stocks held on to small gains, as cooling US inflation fueled bets of a Federal Reserve rate cut in September. Earlier figures showed lower-than-expected UK inflation that also boosted sentiment, while UBS Group AG rose on upbeat earnings.
The Stoxx Europe 600 Index was up 0.5% by the close. The travel and leisure sector jumped, boosted by Flutter Entertainment Plc after the operator of the FanDuel online sportsbook beat estimates. Miners lagged after the world’s largest steel company flagged an industry-wide crisis in China.
Data showed underlying US inflation eased for a fourth month on an annual basis in July. The so-called core consumer price index — which excludes food and energy costs — increased 3.2% in July from a year ago, still the slowest pace since early 2021.
“Recent volatility has largely been driven by macro news and this is a case of dull news is good news,” said Neil Birrell, chief investment officer at Premier Miton Investors. “It also allows the Fed breathing space as they weigh the economy ahead of their next meeting.”
Europe’s benchmark index had a rough start to August, a seasonally weak month, on worries that a slowing US economy was headed for a recession. The gauge has now recovered more than half its declines this month, but remains about 4% below a May record.
The UK’s FTSE 250 was up 1% after data showed the inflation rate picked up for the first time this year, but remained below the level economists and the Bank of England had expected, bolstering the case for further rate cuts. The blue-chip FTSE 100 also rose.
Equities “could go through a soft patch” if macroeconomic data were to disappoint, “but I think that would be short-lived,” said Susana Cruz, a strategist at Panmure Liberum. In addition to easing inflation, “the ideal scenario” would be if Chinese consumption rather than industrial activity shows an acceleration, she said.
Meanwhile, data Wednesday showed firms across the euro zone slowed hiring in the second quarter amid mounting signs of economic weakness.
Among individual movers, UBS rose after it posted higher-than-expected profit, buttressing Chief Executive Officer Sergio Ermotti’s efforts to return capital to shareholders and finalize the integration of Credit Suisse. Flutter’s results boosted other gambling companies, including Entain Plc, while travel company TUI AG gained after issuing a better-than-expected earnings report.
For more on equity markets:
- Eroded Confidence Leaves Market Prone to Setbacks: Taking Stock
- M&A Watch Europe: Rheinmetall, Kesko, Aviva, Nol, Addiko
- Growing Appeal of UK Stocks Could Embolden More IPOs: ECM Watch
- US Stock Futures Unchanged; Ouster, Ibotta Fall
- Jobs Data Runs Hot N Cold: The London Rush
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--With assistance from Michael Msika.
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