European stocks closed on a positive note this Friday, with major markets in the region marking their second consecutive week of gains. This uptick comes as investors continue to respond favorably to the European Central Bank's recent interest rate cut, and remain hopeful for further reductions from various central banks.
The markets also reflected positively on encouraging economic data from China and digested the latest earnings reports and corporate announcements.
On Thursday, the European Central Bank announced a 25-basis-point cut to its deposit rate, bringing it down to 3.25%. This decision was attributed to sluggish economic growth and moderate inflation levels.
According to its quarterly survey of professional forecasters, the ECB predicts a fall in inflation to 1.9% by 2025, revising earlier expectations of 2%. The projections for 2024 and 2026, however, remain unchanged at 2.4% and 1.9%, respectively.
The pan-European Stoxx 600 index rose by 0.21%, with Germany's DAX and France's CAC 40 increasing by 0.38% and 0.39%, respectively. The U.K.'s FTSE 100 dipped by 0.32%, while Switzerland's SMI saw a gain of 0.18%.
Elsewhere in Europe, markets displayed mixed performances. Austria, Finland, Greece, Ireland, the Netherlands, Poland, Spain, and Sweden ended the session on a positive note. Conversely, Belgium, Denmark, Iceland, Norway, Portugal, Russia, and Turkey saw declines.
In the UK market, mining stocks surged following China's decision to reduce deposit rates for the second time this year, alongside the launch of a central bank swap facility aimed at invigorating the equity market. Shares of Prudential rose by approximately 3.25% and Fresnillo by nearly 3%. Notable gains were also seen in Anglo American Plc, Antofagasta, Glencore, Endeavour Mining, Whitbread, Centrica, and Rio Tinto—each increasing between 1% and 2.1%.
British luxury brand Burberry experienced a 3.5% upswing after official figures showed an unexpected growth in UK retail sales for September, driven by increased sales of technology products.
Conversely, Smith (DS) dropped 3.4% and British American Tobacco fell by around 3.2% after announcing plans to resolve ongoing lawsuits in Canada through a court-mediated process.
In the German market, Daimler Truck Holding soared over 7%, with Continental close behind, gaining nearly 3.5%. Other companies such as BASF, Fresenius Medical Care, Adidas, Porsche, Siemens Healthineers, and Volkswagen also posted gains of 1% to 1.6%.
On the downside, Zalando, Commerzbank, MTU Aero Engines, E.ON, and Merck experienced losses ranging from 0.6% to 1.7%.
In France, Kering witnessed an increase of nearly 3.5%, while LVMH, Societe Generale, Stellantis, Teleperformance, ArcelorMittal, Dassault Systemes, Pernod Ricard, Hermes International, Michelin, and STMicroElectronics witnessed gains between 1% and 2.3%.
According to the Office for National Statistics, UK retail sales rose unexpectedly by 0.3% in September, defying forecasts for a 0.3% decline. This represents the third consecutive monthly increase, after rises of 1% in August and 0.8% in July.
The European Central Bank reported that the euro area current account surplus dropped to a five-month low of EUR 31 billion in August, down from EUR 41 billion the previous month, representing the lowest surplus since March. The expected figure had been EUR 42 billion.
Eurostat data indicated that Eurozone construction output experienced a modest increase of 0.1% in August, recovering from a 0.5% decline in July.
According to the European Central Bank's Survey of Professional Forecasters, Eurozone inflation is anticipated to ease more than previously expected by 2025.
The headline inflation projection for 2024 remains steady at 2.4%. However, for the subsequent year, it has been adjusted downwards to 1.9% from 2%, while the forecast for 2026 remains at 1.9%. Long-term HICP inflation expectations stay anchored at 2%.
The real economic outlook for the current year holds at 0.7%. However, the forecast for 2025 has been trimmed to 1.2% from 1.3%, largely due to weaker-than-expected economic activity during the latter half of 2024.
GDP growth estimates for 2026 remain consistent with the previous survey at 1.4%, as do the longer-term GDP growth expectations at 1.3%.
