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On Tuesday, Europe’s benchmark index, the STOXX 600, closed at a near two-week high, buoyed by increasing anticipation of an interest rate cut by the U.S. Federal Reserve in September. This positive sentiment outweighed concerns from disappointing earnings reports, such as those from Swiss medtech firm Tecan.
The STOXX 600 index ended the day up 0.5%, with healthcare (.SXDP) and utilities sectors leading the gains. Conversely, the basic resources sector experienced the largest decline.
Recent U.S. data revealed that producer prices rose less than anticipated in July, reinforcing expectations that the Fed may lower rates in September. Upcoming U.S. consumer prices and retail sales reports will be closely analyzed for further insights into the health of the world’s largest economy, especially after recent fears of a recession impacted global risk assets.
Alejandra Grindal, Chief Economist at Ned Davis Research, commented, “Many economies once seen as resilient, including the U.S., China, and the euro zone, are now showing signs of slowing. However, the risk of a recession remains low.”
Market forecasts now suggest the Fed may implement around 100 basis points of rate cuts by the end of the year, according to LSEG’s FedWatch Tool. Meanwhile, a Reuters poll indicates that the European Central Bank is expected to reduce its deposit rate twice more this year, though fewer cuts are anticipated than previously thought.
In other economic updates, Spain’s final EU-harmonized inflation rate dropped to 2.9% in July from 3.6% in June. German investor sentiment fell more sharply than expected in August, marking its largest decline in two years.
Among European indices, Spain’s benchmark index led regional gains with a 0.7% rise, while Germany, France, London, and Italy saw increases between 0.2% and 0.5%. The fear gauge index also fell to a near two-week low.
At the bottom of the STOXX 600, Tecan Group saw a significant drop of 17.3%, marking its steepest one-day fall since 2002, due to weaker-than-expected half-year results and a reduced full-year outlook. Fortnox fell 14% following the departure of CEO Tommy Eklund.
In contrast, Pandora rose 3.7% after revising its full-year growth outlook upwards. HelloFresh surged 19% on better-than-expected second-quarter core earnings, driven by robust growth in its ready-to-eat segment. French engineering firm GTT climbed 5% following a stock upgrade to “buy” by Berenberg.
British homebuilder Bellway increased 4% after unexpectedly withdrawing its £720 million bid for Crest Nicholson, leading to a 20% drop in Crest’s share price.
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