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Euro zone inflation posts record drop but core prices
accelerate
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Banks post worst month in three years amid banking crisis
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ABB climbs on share buyback
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STOXX 600 up 0.7%
(Adds details, chart; updates prices throughout)
By Shubham Batra, Sruthi Shankar and Bansari Mayur Kamdar
March 31 (Reuters) - European shares rose on Friday, as
fears of a full-blown banking crisis continued to recede and a
record monthly drop in euro zone inflation figures and a dip in
the U.S. Federal Reserve's favoured inflation gauge lifted
sentiment.
The pan-European STOXX 600 index closed 0.7%
higher.
The index was headed for a second-straight quarterly gain, but on track to end March slightly lower after action-packed weeks following the collapse of two mid-sized U.S. lenders and the takeover of Credit Suisse.
Banks slipped 0.4% - with Swedbank down 4.9%. The banking sector dropped 14% in March to post its worst monthly performance since 2020. While a slew of measures to support the sector and a rally in technology stocks have pushed the STOXX 600 to three-week highs, investors have not completely shaken off fears of risks in the future.
"What lies ahead is tricky. Our forecasts for economic
growth and interest rates are largely sideways. We don't expect
rate cuts by the Federal Reserve or the ECB this year," said
Willem Sels, global CIO, Private Banking & Wealth Management at
HSBC.
The market will have to reassess its dovish reaction as
inflation, especially core inflation, was coming down
"agonizingly slowly," he added.
Eurostat data showed inflation in the euro zone dropped by
the most on record in March. However, growth in core prices
accelerated.
The European Central Bank still has a "little way" to go
with interest rate increases to vanquish core inflation, French
ECB policymaker Francois Villeroy de Galhau said in a newspaper
interview.
"As core euro-zone inflation edged up to a new all-time high
in March we think policymakers will remain in hawkish mood for
now," Andrew Kenningham, chief Europe economist at Capital
Economics, said in a note.
"Our forecast is for another 100bp of rate hikes in the
coming months - substantially more than the markets are pricing
in."
Separate data showed U.S. personal consumption expenditures
inflation fell in February, with the core reading lower than
expected.
Rate-sensitive tech shares and real estate stocks gained 0.5% and 0.4%, respectively.
Among individual stocks, Swiss engineering company ABB gained 1.8% as it said it would launch its new $1
billion share buyback on April 3 with the intention to buy up to
30 million of its shares.
Adidas AG gained 5% as UBS raised the
Germany-based athletics company's price target, while H&M rose 3.4%, amid a streak of analyst upgrades after the
Swedish fashion retailer posted Q1 results above market
expectations.
Retail shares continued to maintain momentum, adding
1.7%.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ STOXX 600 ends turbulent Q1 higher Euro zone inflation expectations vs reality ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Shubham Batra, Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; Editing by Janane Venkatraman, Nivedita Bhattacharjee and Jonathan Oatis)
