PARIS: European shares advanced on Friday to briefly hit their highest level since February 2022 and end their fourth week higher, as traders bet that central banks have finished raising interest rates and will switch to cuts early next year.
The pan-European STOXX 600 index closed 0.7% higher for the day and 1.3% up for the week.
Travel and leisure stocks led weekly gains, adding 4.9%, while energy and miners were the worst hit.
Latest data confirmed German inflation eased in November, bolstering the case for a peak in euro zone interest rates, while an upbeat read of the US labour market also supported investor risk appetite.
“European stocks are catching up with their US peers and we’ve seen the DAX hit record highs,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
“The major drivers in the European market rally are rising expectations that the ECB will start cutting rates next year due to slowing inflation and European economies.” The STOXX 600 has gained 11% so far this year, with Germany’s DAX jumping 20% to a fresh record high, while the US benchmark S&P 500 index has risen 19.4% year-to-date.
Among major stock movers, Kering rose 2.6% after the owner of Gucci announced an interim dividend for 2023.
Other luxury giants LVMH and Hermes gained 3.3% and 1.5%, respectively, with the broader sector adding 2.0%.
Anglo American slumped 19% after the global miner aimed to reduce capital expenditure by $1.8 billion across its businesses by 2026 and forecast lower 2024 production.
Sainsbury rose 1.6% after Goldman Sachs raised the supermarket group’s stock to “buy” from “neutral”.
Vivendi climbed 2.4% as the media firm is set to replace Worldline on the CAC40 index, effective from Dec. 18.
Poste Italiane rose 0.6%, reversing early losses, after a ministry spokesperson said the Italian Treasury is not working to cut its stake in the postal service.
DNB eased 1.7% after UBS downgraded the Norwegian bank to “sell” from “neutral.”
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