European stocks edged higher on Thursday as traders weighed up strong US economic data released during the previous session and the minutes of the Federal Reserve’s latest policy meeting.
The Stoxx Europe 600 gauge closed up 0.4 per cent. The regional index had on Wednesday snapped a losing streak after closing lower in each of the four previous trading days, falling 1.3 per cent on Tuesday. Various countries in the bloc last week introduced fresh coronavirus curbs in response to surging case numbers.
Germany’s Dax index rose 0.2 per cent, while France’s CAC 40 gauge rose 0.5 per cent. London’s FTSE 100 index gained 0.3 per cent.
Following the reimposition of pandemic restrictions in countries including Germany and the Netherlands, Goldman Sachs on Wednesday slightly lowered its growth expectations for the euro area for the fourth quarter of this year by 0.2 percentage points to 0.8 per cent. The bank lowered its estimate for the first quarter of 2022 by 0.3 percentage points to 0.6 per cent.
“The downgrade is driven by expectations for renewed weakness in Covid-sensitive services, such as hospitality, arts and entertainment,” the bank noted, adding that any impact on inflation was likely to be small. “[We] look for a sharp growth rebound in Q2, as restrictions are lifted,” it added.
In the US, the blue-chip S&P 500 index had ended Wednesday up 0.2 per cent, with the technology-focused Nasdaq Composite gauge closing up 0.4 per cent. Those moves followed fresh data showing that US weekly jobless claims had reached their lowest point since 1969.
Other data showed that a measure of inflation followed closely by the Fed had posted its biggest year-on-year jump in October since the 1990s. The core personal consumption expenditure index posted a 4.1 per cent increase, in line with economists’ expectations but up from 3.7 per cent in September.
Meanwhile, minutes from the Fed’s November policy meeting indicated that officials “stressed that maintaining flexibility” was important as the $120bn-a-month pandemic-era asset-purchasing stimulus programme is withdrawn.
Officials, who are expected to only begin raising rates once such tapering has come to an end, noted that inflation might “take longer to subside than they had previously assessed”.
The US stock market and the Treasury market were closed on Thursday for the Thanksgiving holiday.
Tatjana Greil Castro, co-head of public markets at Muzinich & Co, said the Thanksgiving holiday was “an excuse for all markets to be very slow” and that “whatever data we saw yesterday will not be able to be expressed until tomorrow, so we should see very little in terms of movement”.
Arguing that higher energy and food prices were here to stay, she said inflation was likely to prove “sticky” in the longer term.
In European government debt markets, the yield on the 10-year German Bund was flat at minus 0.25 per cent on Thursday. Bond yields move inversely to their prices.
Although the Fed, ECB and the Bank of England are yet to begin raising rates, South Korea on Wednesday increased borrowing costs for the second time in three months, following the Reserve Bank of New Zealand’s announcement earlier in the week that it would tighten monetary policy.
In currencies, the dollar index — which measures the greenback against six other currencies — fell about 0.1 per cent. The euro, which on Wednesday touched its lowest point against the dollar since June 2020, rose back above the $1.12 threshold.
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