Europe’s STOXX 600 climbed higher as buoyant earnings led travel and leisure, financial stocks

Europe’s main stock index was lifted by travel and leisure and financial shares on Wednesday, as investors took comfort in fresh evidence of moderate inflation in the world’s largest economy that supported the initial rate-cut narrative.

The pan-European STOXX 600 closed 0.5% higher, with all major regional markets also ending in positive territory.

Data showed that US consumer prices recovered in July as expected, but the trend remained consistent with lower inflation, bolstering hopes that the Federal Reserve will cut rates soon, a day after it moderated producer price numbers.

“The CPI report is a green light for the Fed to cut interest rates at their next decision on September 18,” said Bill Adams, chief economist at Comerica Bank.

Comerica has forecast cuts to the federal funds target by a quarter of a percentage point at each of the next four decisions in September, November and December, and in January 2025.

Investors are hoping the Fed will deliver a rate cut in early September as fears of a US recession earlier this month dampened global risk assets.

The travel and leisure sub-index posted its biggest one-day gain of 3% after the world’s largest online betting firm raised its full-year forecast, lifted by a 10.5% jump in Flutter.

News that Irish betting giant Playtech has entered into talks to buy Playtech’s Italian unit has sent shares in the UK gambling technology firm up 14%.

In the euro zone, second quarter data showed that euro zone GDP rose 0.3% quarter-on-quarter, while employment rose 0.2% quarter-on-quarter.

Additionally, France’s consumer prices rose 2.7% year-on-year in July, slightly higher than the previous month’s initial reading.

On the earnings front, Swiss bank UBS rose 5.3% after posting a quarterly profit that doubled market estimates.

Also, the financial index hit a two-week high after results in German insurer Telangus rose nearly 7%.

Stroman rose 13% after the dental implant maker announced the sale of its DrSmile aligner business and raised its full-year guidance.

Among others, Thyssenkrupp fell 6.3% after swinging into a quarterly net loss, while Carlsberg fell 4% after a gloomy outlook for the Chinese market.

Of the STOXX 600 companies that reported second-quarter earnings, 54.8% beat estimates, LSEG data showed, versus a typical beat rate of 54%.

However, stocks of basic resources were hurt by curbing profits.

Utilities were also dragged down by a near 6% drop in RWE as the group’s management failed to address concerns over reports it may buy the US operator of gas-fired power plants.