European shares closed higher as investor optimism grew over the possibility of the US Federal Reserve ending its interest rate hiking cycle. Additionally, China’s extension of certain policy measures to support its struggling property sector also contributed to the positive sentiment.
The pan-European Stoxx-600 index rose by 0.7%, marking its third consecutive session of gains. Irish shares led the way with a jump of 2.1%, outperforming their continental peers. This surge was largely driven by Kingspan, an Irish construction company, which saw its stock price soar by almost 16% after forecasting record profits for the first half of the year. As a result, the European construction sub-index also experienced a notable increase of 2.4%.
Mining firms were among the top gainers in Europe, with a 1.8% increase, as metal prices rose due to China’s support for its property market. In November, China implemented a rescue package aimed at bolstering the real estate sector, and it has now extended some of these policies until the end of 2024. This news had a positive impact on luxury firms with exposure to China, such as LVMH, Hermès, and Richemont, whose shares rose between 2% and 2.3%. Industrial stocks, which are also sensitive to developments in China, advanced by 1%.
The US Federal Reserve has indicated that it may be nearing the end of its rate hiking cycle, according to several officials. Market participants are now eagerly awaiting key data on US consumer prices to gain further clarity on whether there has been a significant slowdown in inflation. This data will be crucial in shaping expectations around the future trajectory of interest rates.
Overall, European shares ended the day on a positive note, with Irish shares leading the way. The possibility of the US Federal Reserve ending its rate hiking cycle and China’s supportive measures for its property market have provided investors with renewed optimism. However, market participants are still awaiting important data to gain a clearer understanding of the inflationary environment and its potential impact on monetary policy moving forward.