By Bansari Mayur Kamdar
(Reuters) – European shares extended their rally on Friday, on track to end the week higher, following a sharp jump in the previous session after the European Central Bank (ECB) signalled an end to its rate hike cycle.
The rose 0.9%, supported by gains in China-exposed luxury stocks after better-than-expected economic data in the world’s second-largest economy.
The index is up 2.1% so far this week.
Paris-listed Kering (EPA:) and LVMH climbed 2.7% and 3.2%, respectively.
The pan-European STOXX 600 index notched its biggest percentage gain in six months on Thursday following the ECB’s 25 basis point (bps) hike, its 10th and likely final hike in a 14-month-long fight against inflation.
“We continue to see no cuts before September 2024 – implying a 12-month pause at 4.00% – and believe rates are still unlikely to fall back below neutral in 2025 given our ongoing concern about persistent inflation in the medium term,” said economists at Deutsche Bank in a note.
Overly loose budget policies risk fuelling inflation at a time when the central bank is fighting to bring it lower, said ECB policymaker Francois Villeroy de Galhau.
Investors are now focused on central bank meetings next week, with the U.S. Federal Reserve and Bank of England set to announce their rate decisions.
London’s blue-chip led weekly gains in the region, adding 0.7% on Friday.
Sweden’s H&M (ST:) shed 4.2% on reporting flat sales in its most recent quarter, lagging expectations as the fashion group struggles to attract customers while the cost-of-living crisis drags on.
Bayer (OTC:) rose 1.3% on new its CEO’s plans to cut management jobs.
Chrysler parent Stellantis (NYSE:) edged higher but was among the worst performers on 40, after U.S. auto workers launched a strike at Detroit Three.
(This story has been corrected to say Bank of England, not Bank of America, in paragraph 8)
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