European markets close higher as investors digest UK growth, cooler-than-expected U.S. inflation

20 August 2024

LONDON — European stocks closed higher Thursday, maintaining the week’s positive momentum as investors digested cooler-than-expected inflation readings in the U.S and U.K.

The regional Stoxx 600 index ended up 1.15%, with the technology sector leading gains, up 2.54%. Stocks were boosted in afternoon deals by the release of strong U.S. retail sales data, which helped allay recent nerves about the state of the world’s biggest economy, sending Wall Street futures higher.

European markets closed higher Wednesday as investors assessed key inflation prints from the U.S. and U.K. U.K. inflation rose to 2.2% in July, coming in slightly below expectations but inching back above the Bank of England’s 2% target, data from the Office for National Statistics showed.

Later in the day stateside, stocks climbed after the U.S. consumer price index reflected a slowing annual inflation rate of 2.9%, the lowest since 2021.

The U.S. data — coupled with a key measure of wholesale inflation released Tuesday that rose less than expected — has reassured investors that an economic soft landing is back on the table.

U.S. stocks were up in early deals Thursday, with the Dow Jones Industrial average, the S&P 500 and the Nasdaq Composite all gaining over 1%.

Investors are now assessing whether the prints point to an interest rate cut of 25 or 50 basis points by the U.S. Federal Reserve in September. Market pricing suggests a 58.5% probability of the former and a 41.5% probability of the latter, according to CME’s FedWatch tool.

On Thursday, U.K. GDP data showed the economy expanded 0.6% in the second quarter, in line with expectations.

Asia-Pacific markets largely rose overnight after Japan’s gross domestic product data beat expectations.