May 31 (Reuters) - European shares climbed on Friday after softer U.S. inflation data spurred hopes of interest rates cuts by the Federal Reserve, while June rate cut bets for euro zone remained intact despite hotter-than-expected inflation print from the region.
The pan-European STOXX 600 index (.STOXX), opens new tab was up 0.3%, led by advances in utilities (.SX6P), opens new tab that rose 0.7%.
The benchmark index is on track for a second week of declines as yields in the eurozone spiked to mirror their U.S. counterparts on worries over interest rates staying elevated for longer. The index, however, is likely to log gains for the month.
A U.S. Commerce Department report showed inflation may have made a little progress toward the Fed's 2% goal last month, with the core personal consumption expenditures (PCE) price index rising 0.2% in April. Economists had expected the core PCE index to rise 0.3% in April.
After the report, traders priced in about a 51% chance of a rate cut by September, versus about 49% before the report.
"This is a market-positive report. It appears that both the headline and core numbers came in very much in line with expectations," said Art Hogan, chief market strategist, B Riley Wealth.
Meanwhile, euro zone inflation rose in May, a sign the European Central Bank still faces a slow and uncertain journey to rein in prices. A rate cut by the ECB in June is all but certain next week, a Reuters poll showed.
The yield on Germany's Bund , the eurozone benchmark, rose after the inflation data but hovered near six-month highs and was last at 2.661%.
German retail sales fell more than expected in April, while French consumer prices rose 2.7% year-on-year in May, above expectations due to higher energy prices.
Swedish defence equipment maker Saab (SAABb.ST), opens new tab was the top gainer on the benchmark index, jumping 5.3% after it received an order worth 7.7 billion crowns ($727 million).
In company news, JD Sports Fashion (JD.L), opens new tab dropped 6.0% to the bottom of the STOXX 600 after the British sportswear retailer kept the profit guidance same for its 2024/25 year.
Telecom Italia (TLIT.MI), opens new tab was also at the bottom of the index, with shares falling as much as 2.7% after U.S. investment firm KKR (KKR.N), opens new tab secured an unconditional EU antitrust approval for the 22-billion-euro ($24 billion) acquisition of the telecom company's fixed-line network.
IT services firm Capgemini (CAPP.PA), opens new tab fell 4.9% as JP Morgan cut its rating to neutral from overweight.
Energy firm Centrica (CNA.L), opens new tab jumped 3.8% after RBC raised its rating to 'outperform' from 'sector perform.'
Reporting by Shubham Batra and Purvi Agarwal in Bengaluru; Editing by Sohini Goswami and Tasim Zahid
