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Europe close: Stocks rise even as ECB guides towards more rate hikes

By Alexander Bueso

Date: Thursday 02 Feb 2023

Europe close: Stocks rise even as ECB guides towards more rate hikes

(Sharecast News) - European stocks clocked in with solid gains on Thursday after dovish remarks from the US Federal Reserve on inflation prompted rallies on Wall Street and in Asia.
Investors were similarly optimistic as regarded the Bank of England, which imposed a widely-expected 50 basis point rate hike.

In the case of the European central Bank, which also hiked by 50bp, despite protestations from its President, Christine Lagarde, to the contrary, analysts believed that after March only or two more smaller 25 basis point interest rate hikes were left.

The pan-European Stoxx 600 index was 1.35% higher at 459.20, alongside a 2.16% jump for Germany's Dax to 15,509.19 while Spain's Ibex 35 added 1.45% to 9,229.70.

In parallel, the yield on the benchmark 10-year Bund fell by 20 basis points to 2.079%, while euro/dollar dropped 0.71% to 1.0912 - having earlier hit 1.0912.

For the euro some analysts noted how the single currency had moved into so-called overbought territory the day before on technical charts.

In other economic news, German exports fell more than expected in December as the impact of high inflation and the war in Ukraine hit trade, according to official data released on Thursday.

Exports fell by 6.3% compared with November, while imports fell by 6.1%.

For the full calendar year, exports rose 14.3% on 2021 on a seasonally-adjusted basis. Imports gained by 24.3%, driven by increased energy prices due to Russia's unprovoked invasion of Ukraine.

There were signs that supply chain issues might be easing in Europe's largest economy as data showed materials shortages had decreased in German manufacturing, according to a survey by the Ifo economic institute.

In January, 48.4% of companies surveyed reported problems, down from 50.7% in December, Ifo said.

"Given the mild winter recession that's emerging, we would've liked to see a stronger decline," Ifo's head of surveys Klaus Wohlrabe said in a statement.

In equity news, Shell shares slipped despite the company posting a stonking $40bn annual profit on the back of surging gas prices driven by the war in Ukraine.

The news renewed calls for the UK government to reform its windfall tax measures again as consumers prepared for a 40% rise in energy costs this April.

ING shares fell 5% despite the Dutch bank reporting better-than-expected results.

British gas owner Centrica dropped 3% after an undercover newspaper investigation found the energy company was sending debt collectors to break into the homes of vulnerable customers and force-fitting prepayment meters.

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