European Shares Close Higher as Rally Continues Into December; Mining Stocks Up 4% on China Data

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European markets closed higher Friday after finishing their best month since January amid a global rally in stocks and bonds.

The Stoxx 600 index closed up 1%, with mining stocks leading gains with a 4.2% rise after China’s manufacturing sector recorded an unexpected expansion.

EUROPEAN MARKETS

TICKER COMPANY PRICE CHANGE %CHANGE 
.FTSEFTSE 1007529.3575.61.01
.GDAXIDAX16397.5200
.FCHICAC 40 Index7346.1500
.FTMIBFTSE MIB29928.45191.070.64
.IBEXIBEX 35 Idx10140.800

The Stoxx gained 6.45% in November, according to LSEG data, as equities pivoted from three straight monthly losses.

Major bourses ended on an upbeat note after flash data estimated euro zone inflation has now fallen to 2.4%, down from 2.9% in October and significantly lower than forecast.

European Central Bank officials have repeatedly pushed back against investor expectations of rate cuts next year, insisting it is too soon to discuss when they might come.

However, the fresh figures led market watchers to suggest the ECB may need to revise its inflation forecasts and fueled expectations for the first cut to come as soon as April.

Cooling U.S. inflation and signs of continued economic resilience have also sent U.S. stocks and bonds on a tear. Futures now price in a significant chance of five cuts by the Federal Reserve next year.

Oil prices were lower Friday after the Organization of the Petroleum Exporting Countries coalition and its allies, known as OPEC+, announced there would be no formal extension of production cuts. However, Saudi Arabia extended its 1 million barrel per day voluntary cut into the first quarter, and other members announced their own reductions.

Euro zone manufacturing activity continues decline

Euro zone manufacturing continued to weaken in November, though some bright spots emerged, according to the latest purchasing managers’ index figures from HCOB and S&P Global.

The overall PMI reading was 44.2 last month, putting the sector in contraction territory for the seventeenth consecutive month. The rate of decline was less severe across new orders, stocks and purchasing activity.

Austria was the worst performer in November, followed by Germany and France.

The reading comes as investors assess whether the European Central Bank may be pushed into rate cuts sooner than previously indicated, given the decline in key inflation gauges and the 0.1% economic contraction in the third quarter.

U.K. house prices rose 0.2% in November, according to data from lender Nationwide that was published Friday. Economists polled by Reuters had forecast a 0.4% decline.

House prices were still 2% lower than a year ago.

“There has been a significant change in market expectations for the future path of [the Bank of England’s] Bank Rate in recent months which, if sustained, could provide much needed support for housing market activity,” said Nationwide’s chief economist, Robert Gardner.

In mid-August, investors expected a peak rate of 6% followed by a decline to around 4% over the next five years, but markets now suggest rates have already peaked at 5.25% and will be lowered to around 3.5% in the coming years, he said. That has sent down longer-term swap rates that underpin mortgage pricing.

“If sustained, this will help to ease the affordability pressures that have been stifling housing market activity in recent quarters, where the number of mortgage approvals for house purchases has been running at c.30% below pre-pandemic levels,” Gardner said.

Source : CNBC