European shares displayed resilience on Wednesday as investors turned their attention to the upcoming policy decision by the U.S. Federal Reserve. Among regional bourses, British stocks notably outperformed their counterparts, thanks to a moderation in Bank of England (BoE) rate hike expectations spurred by cooling UK inflation data.
The pan-European STOXX 600 index bounced back, recording a 0.4% gain following two consecutive sessions of losses. The healthcare sector, in particular, made substantial gains, surging by nearly 1% as of 0809 GMT.
Commerzbank (ETR: CBKG) saw an uptick of 1.2% after the German financial institution’s finance chief revealed on Tuesday an optimistic projection of earning net interest income of 8 billion euros ($8.5 billion) for the current year. This growth is attributed to the favorable impact of rising interest rates.
Investor focus remains squarely on the Federal Reserve’s policy decision, scheduled for 1800 GMT, with expectations leaning toward the central bank maintaining its current interest rate stance.
The UK’s export-driven FTSE 100 index posted a solid 0.6% gain, benefitting from a weakening pound following an unexpected dip in British annual consumer price inflation (CPI) figures for August. This decline prompted investors to dial back their expectations of impending BoE rate hikes, just one day ahead of the central bank’s policy announcement.
Nick Rees, FX market analyst at Monex Europe, commented on the situation, stating, “Despite the progress on disinflation, however, this latest CPI data is probably not enough to call an end to policy tightening at tomorrow’s Bank Rate announcement. MPC members will want to be sure this is not just a one-off fluke, and based on previous communications by BoE speakers, would like to be convinced of a sustained slowdown in wage growth before calling an end to policy tightening.”
Rate-sensitive London-listed homebuilders experienced a notable surge, with gains of 3.6%.
In Germany, producer prices witnessed their most significant year-on-year decline in August since the commencement of data collection in 1949, raising hopes for further inflation relief in Europe’s largest economy.
Just Eat Takeaway’s shares surged by 6.4% following a federal judge’s decision on Tuesday to allow the company’s U.S. unit, Grubhub, and other food delivery entities to pursue legal action against New York City regarding a law that caps the fees they can charge restaurants for meal deliveries.
On a less favorable note, Pearson faced a 4.9% decline after the British education group announced the appointment of Microsoft (NASDAQ: MSFT) executive Omar Abbosh as its new CEO, with the transition set to take place in early 2024.
As markets continue to evolve throughout the day, European investors grapple with a mix of domestic and international factors, with the impending Federal Reserve decision and regional economic indicators taking center stage.
