European Stocks Rise as Investors Focus on US Inflation
European stocks rose on Wednesday as investors focused on US inflation data for clues on the Federal Reserve’s policy outlook. The Stoxx Europe 600 Index gained 0.3%, while the UK’s FTSE 100 Index rose 0.4%.
The European markets were supported by a strong performance in the US, where the S&P 500 Index closed at a record high. Investors are now turning their attention to the US consumer price index, which is due to be released later in the day.
Inflationary Pressures
Inflationary pressures have been building in the US, with the consumer price index rising to a seven-year high in June. The data is expected to show that inflation rose further in July, which could prompt the Fed to consider tapering its bond-buying program.
The Fed has been buying bonds to keep interest rates low and stimulate the economy. If the Fed decides to reduce its bond purchases, it could lead to higher interest rates, which could weigh on stocks.
European Markets
In Europe, the markets were supported by a strong performance in the banking sector. Shares of Deutsche Bank AG rose 1.3%, while shares of UBS Group AG gained 1.2%.
The banking sector has been under pressure in recent weeks due to concerns about the impact of negative interest rates on their profitability. However, the sector has been buoyed by hopes that the European Central Bank will soon announce a new stimulus package.
Oil Prices
Oil prices were also in focus, with Brent crude rising 0.7% to $45.45 a barrel. The rally was driven by hopes that demand for oil will pick up as economies around the world continue to reopen.
Currency Markets
In the currency markets, the euro was little changed against the US dollar, trading at 1.1750. The pound was also little changed, trading at 1.3090 against the dollar.
Outlook
The markets are likely to remain volatile in the coming weeks as investors digest the US inflation data and await further news from the Fed. Investors will also be keeping an eye on the progress of the coronavirus pandemic and the impact it is having on the global economy.