(Bloomberg) -- European stocks advanced on optimism over future interest-rate cuts ahead of a keenly anticipated speech from Federal Reserve Chair Jerome Powell.
The Stoxx Europe 600 Index was up 0.3% by the close in London, bolstered by gains among retailers and the consumer goods sector. Deutsche Bank AG rose 4.0% after saying it expects a €430 million ($480 million) boost to its earnings after making progress in talks in the Postbank AG litigation. Shares pared some gains late in the session after data showed US manufacturing activity contracted, while Treasury yields rose.
A volatile start to the month saw worries over a slowing US economy spook investors, spurring declines across European equities. The region’s benchmark has nearly recouped its losses as traders bet that rate cuts from central banks will ultimately support risk assets, with signs of euro-zone wage growth slowing reinforcing the case for the European Central Bank to continue policy easing next month.
That view was supported by the release of minutes from the Fed showing that several officials acknowledged there was a plausible case for cutting interest rates at their July meeting. The next focus for traders will be Powell’s comments Friday at the Jackson Hole economic symposium.
Signs that Europe’s economy is picking up is also adding to optimism. The euro-area got an unexpectedly strong boost from the Paris Olympics, which propelled private-sector growth to the fastest pace in three months.
“The European economy is clearly recovering, albeit slowly,” said Stephane Deo, senior portfolio manager at Eleva Capital SAS. “And European companies managed to defend their margins much more than many anticipated. This should be a support for the equity market looking forward.”
Well-received earnings updates provided a boost on Thursday. Germany’s CTS Eventim AG & Co. KGaA rallied after the ticket seller hiked its guidance, and JD Sports Fashion Plc rose after reporting results that showed sales returned to growth.
Swiss Re AG gained after its profit beat estimates on lower catastrophe claims, even as insurance peer Aegon Ltd. fell after reporting a decline in operating profit during the first half.
For more on equity markets:
- Demand Weakness Is a Hurdle for Europe’s Recovery: Taking Stock
- M&A Watch Europe: Millicom, Deutsche Bank, HelloFresh, EQT
- Europe’s Banks Eye IPOs After Years on Sidelines: ECM Watch
- US Stock Futures Unchanged; Urban Outfitters, Snowflake Fall
- Can the UK Stop Bank Scams?: The London Rush
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--With assistance from Michael Msika.
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