Defensive sectors prop up Europe’s STOXX 600, banks slide
By Paolo Laudani and Sruthi Shankar
(Reuters) -European stocks edged higher on Wednesday, aided by defensive sectors, as uncertainty around China’s stimulus plans kept the mood subdued ahead of key U.S. inflation data later this week.
The continent-wide STOXX 600 index was up 0.1% by 0832 GMT, with investors buying into utilities, healthcare and real estate – sectors considered as a safer bet during times of uncertainty.
Banks were among the top losers, down about 0.9%.
Dutch lender ING fell 3.4% after Deutsche Bank downgraded the stock to “hold”, calling 2024 a peak for capital returns and share buybacks.
The benchmark STOXX 600 touched a two-week low on Tuesday, with China-exposed mining and luxury sectors taking a beating as investors were disappointed by a lack of fresh stimulus steps from Beijing.
All eyes will be on a news conference by China’s finance ministry on Saturday for new details on fiscal stimulus.
Other major catalysts this week include the minutes of the Federal Reserve’s last meeting, U.S. consumer prices data and U.S. bank earnings.
“There have been hopes that a softer CPI reading is incoming, which may incentivise the Fed on its rate cutting path,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
However, there is still a chance inflation might prove a bit more stubborn as the jobs market is more robust than expected and retail sales are holding up better than forecast, she added.
The Fed cut rates by a large 50 basis points last month. Investors expect two more rate cuts of 25 bps each this year.
Meanwhile, European Central Bank policymaker Yannis Stournaras is backing two interest rate cuts this year, he told the Financial Times in an interview.
Another ECB policymaker, Francois Villeroy de Galhau, said the ECB is “very likely” to reduce rates next week.
Money market pricing suggests traders have almost fully priced in a 25 bps rate cut by the ECB next week, and see a 94% chance of another such move in December.
UK-listed Rio Tinto (NYSE:RIO) fell 0.5% after the miner said it would acquire Arcadium Lithium for $6.7 billion, in a deal that would make it one of the world’s largest lithium producers.
Shares of Continental gained nearly 6% after the German automotive supplier forecast profitability in its automotive business to improve in the third quarter.
Struggling German battery maker Varta jumped about 22% after it said Porsche AG would invest in its business unit for large-format lithium-ion cells.
