European stocks rise as investors bet on strong US corporate earnings

European stocks rose at the open on Thursday as investors cheered the prospect of strong US corporate earnings and dismissed the threat of more rate hikes to fight inflation.

The national Stoxx 600 increased by 0.4 percent, the German Dax by 0.6 percent. France’s Cac 40 rose 0.7 percent. The FTSE 100 rose 0.3 percent.

Investors cheered more than expected on US retail sales, which should boost corporate earnings, raising the prospect that the US economy would avoid a recession in the first quarter.

Retail sales rose 3 percent, more than the 1.8 percent increase expected by economists polled by Reuters. Overnight, the S&P 500 rose 0.3 percent, while the Nasdaq Composite gained 0.9 percent.

“The US market was strong yesterday, so this is partly a carryover,” said Neil Shearing, group chief economist at Capital Economics. “Investors are focusing on the retail and industrials data as this is good news for earnings rather than worrying about the central bank’s reaction.”

US futures trended higher, with contracts tracking the blue-chip S&P 500 gaining 0.08 percent and the tech-heavy Nasdaq 100 gaining 0.2 percent.

However, the data has continued to convince economists that the major central banks will continue to raise interest rates in a bid to quell persistent inflation.

Two-year US Treasury yields, which are more sensitive to interest rate changes, fell 0.04 percentage point to 4.58%, while 10-year yields fell 0.03 percentage point to 3.8%. Yields rise when bond prices fall.

The dollar index, which measures the greenback against a basket of peer currencies, fell 0.3 percent.

Speaking to EU lawmakers on Wednesday, European Central Bank President Christine Lagarde stressed the need for further rate hikes. The euro gained 0.1 percent against the dollar.

Traders are also awaiting US producer price inflation numbers later on Thursday. The headline count is expected to have risen 5.5 percent in January, compared to a 6.2 percent year-on-year increase in December.

Monthly results fell 0.5 percent in December, the biggest monthly drop since April 2020, fueling speculation that inflation may be slowing.

Brent crude, the international benchmark, was flat at $85.43 a barrel and WTI, the US benchmark, rose 0.2 percent to $78.7 a barrel.

Hong Kong’s Hang Seng Index gained 0.8 percent, while China’s CSI 300 fell 0.7 percent. European stocks rise as investors bet on strong US corporate earnings

Adam Bradshaw

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