European stocks rose on Tuesday as recent stimulus measures from China and supportive inflation figures from the UK boosted risk-on appetite, with investors primed for economic data which could provide further hints on the direction central banks may take.
The Stoxx 600 Index was up 0.6% by 08:07 a.m. London time, led higher by gains across miners and retailers. The UK’s FTSE 100 index gained 1.3% following Monday’s holiday, boosted by figures which showed that food inflation in Britain cooled to lowest level in almost a year in August.
Among individual stocks, Telecom Italia SpA shares advanced after Italy approved a decree which empowers it to take a stake in the firm’s network business, while distribution and services group Bunzl Plc gained after its first-half earnings beat estimates.
While European stocks are still in positive territory for the year, the momentum has waned in August with the benchmark down 2.8% on the month as worries over higher interest rates for longer and a crisis in China’s property market has dampened sentiment. Basic resources and autos, the two cyclical sectors, have seen the biggest losses so far this month.
Questions still remain regarding the path of central bank policy, with investors keeping an eye out for consumer confidence data from the US due later on Tuesday, as well as euro-area inflation and China’s PMI numbers.
“This week markets will look for clues on the ECB and Fed next moves; we have preliminary CPI readings in Europe and labour data from the US, which could support a dovish case for both in the coming meetings,” Susana Cruz, a strategist at Liberum Capital, said. “With the Eurozone heading towards recession, it seems increasingly likely that a dovish case will realize in September and cuts might happen sooner than it is currently expected.”
SECTORS IN FOCUS
- UK grocers after the slowest increase in grocery bills in almost a year drove down inflation in British shops in August, relieving some of the pressure on the Bank of England to keep raising interest rate hikes
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--With assistance from Farah Elbahrawy.