European Stocks Rise on Fed Relief, China Demand Rebound

European shares rose on Friday, as hopes that the U.S. Federal Reserve could adopt a measured approach for rate hikes ahead lifted technology stocks, while miners jumped on growing bets of demand recovery in China.

The continent-wide STOXX 600 rose 0.7% in early trading, with rate-sensitive tech stocks up 1.4%.

Overnight, Atlanta Fed President Raphael Bostic favoured a “slow and steady” rate hike moving forward and a pause by mid- or late-summer.

Policy meetings from both the Fed and the European Central Bank (ECB), and U.S. jobs data are on tap for the next two weeks, while China’s annual parliament session is on Sunday when Beijing will set its economic goals for the year.

Mining stocks rose 2.0% as prospects of China’s reopening shoring up demand was a theme that played out for much of the week after the country’s data pointed to improving economic conditions.

The mining index was set to rise nearly 7% this week, tracking its biggest weekly gain since May 2021, and outpacing other major sectors. The broader STOXX 600 index was set to gain 1% for the week.

Laggards for the week were defensive plays such as utilities, real estate and healthcare.

China’s reopening has also been key for luxury stocks, including luxury giants LVMH and Kering, which have driven much of the year’s gains for European markets along with banks and miners.

“European consumer stocks are set to benefit from a recovery in European and Chinese spending,” Mark Haefele, chief investment officer at UBS Global Wealth Management wrote in a client note.

“With wage growth starting to pick up, inflation past the peak, and less hawkish central banks, we expect disposable income to rise and consumer sentiment to rebound.”

A survey showed the recovery in euro zone business activity gathered pace last month, the latest piece of evidence suggesting the economy will avoid a recession.

Shares of Lufthansa jumped 5.7%, to the top of the STOXX 600, after the German airliner swung to a “clearly positive result” in 2022, while Sweden-based Volvo Car AB added 3.4% as sales grew in February.

Admiral Group PLC slumped 3.3% after brokerage Citigroup downgraded the insurance provider to “neutral” from “buy”.

(Reuters)

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