European stocks moved higher as lower bond yields, a weaker US dollar and reduced expectations of another near-term Federal Reserve rate increase supported market sentiment.
The STOXX 600 rose around 0.2%, with gains led by mining and technology shares. Germany’s DAX also advanced, France’s CAC 40 was broadly flat and the FTSE 100 moved higher. Softer economic data reduced the likelihood of another immediate Federal Reserve rate increase, while money markets placed roughly a 70% probability on rates being left unchanged at the September meeting.
Recent US data included weaker employment figures, inflation broadly in line with expectations, flat producer prices and an unexpected 0.6% monthly decline in July retail sales. Together, those figures reduced pressure on the Federal Reserve to tighten policy again quickly.
Bond yields moved lower as rate expectations changed. That helped technology shares, which gained around 1.1%. Lower yields can support valuations in growth sectors because future earnings become more attractive when discount rates fall.
Mining stocks were stronger still. Basic resources gained around 1.4% as gold prices rose and the dollar weakened. Antofagasta, Hochschild Mining and Glencore were among the strongest names highlighted, rising between roughly 2.2% and 2.7%.
Commodity prices are often set in US dollars while many operating costs are paid in local currencies. Higher metals prices can therefore improve revenue conditions, while favourable currency movements can strengthen margins.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
