European shares rose on Friday and logged their first monthly gain in four months as a host of solid earnings from corporate Europe overshadowed fears of a global recession, with some positive economic data also lending support.
The pan-European STOXX 600 was up 1.28 percent to a near two-month high of 438.29, and logged its best monthly performance since November 2020. It posted a weekly gain of 2.96 percent.
Boosting sentiment, the eurozone economy grew much faster than expected in the second quarter, with gross domestic product rising 0.7 percent quarter-on-quarter in the April-to-June period for a 4 percent year-on-year gain, strongly beating expectations of a 0.2 percent quarterly and 3.4 percent annual gain.
However, inflation this month rose to another record high, with consumer price growth accelerating to 8.9 percent in the month from 8.6 percent a month earlier, far above expectations for 8.6 percent and well clear of the European Central Bank’s 2 percent target.
“The picture still looks patchy, with uneven dynamics in terms of consumption and investment — we still expect a material deterioration in the outlook in Q3 and a mildly negative print in Q4,” Morgan Stanley economists and strategists wrote in a note.
“Underlying inflationary pressure remains strong and we expect further increases in the coming months... We see mounting headwinds from slowing growth and falling input cost pressures,” they wrote.
Meanwhile, data on Thursday showed that the US economy shrank for a second straight quarter.
Worries about a recession have led to scaled down bets of central bank policy tightening, with money markets now pricing in a roughly 44 percent chance of a 50 basis-point hike by the European Central Bank in September, compared with a 50 percent chance earlier this week.
Oil stocks led gains after crude prices jumped more than US$4 a barrel as attention turned to next week’s OPEC+ meeting.
The UK’s blue-chip FTSE 100 rose on Friday, marking its best monthly performance since December last year, as a jump in commodities and a slew of upbeat earnings reports from companies like NatWest outweighed economic slowdown worries.
The index gained 1.06 percent to 7,423.43, rising 2.02 percent from a week earlier.
NatWest rose 8.1 percent after the bank raised its full-year forecast and made a bumper payout to shareholders, lifting the banking index 1.5 percent higher.
“The sector’s earnings so far have benefited from the rising rate environment and volatile financial markets that have boosted trading activity,” said Victoria Scholar, head of investment at Interactive Investor.
However, she added that there were concerns for financial stocks due to the shaky British macroeconomic outlook for the second half.
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