European shares up on Fed easing

European shares have surged on Friday, buoyed by hopes that the US Federal Reserve would adopt a cautious approach to rate hikes in the coming months, which has lifted technology stocks. The region-wide STOXX 600 index rose by 0.7% in early trading, led by rate-sensitive technology stocks, which rose by 1.4%. Mining stocks also surged, with the SXPP index climbing by 2% on growing bets of demand recovery in China.

Atlanta Federal Reserve President Raphael Bostic recently advocated a “slow and steady” approach to rate hikes, with a pause by mid- or late-summer. The coming two weeks are packed with policy meetings from both the US Federal Reserve and the European Central Bank (ECB), as well as US jobs data. Additionally, China’s annual parliament session is on Sunday, when Beijing will set its economic goals for the year.

Luxury stocks, including LVMH and Kering, which have driven much of the European market’s gains this year, along with banks and miners, have been key beneficiaries of China’s reopening. China’s data pointed to improving economic conditions, leading to prospects of China’s reopening shoring up demand. The mining index was set to rise nearly 7% this week, tracking its biggest weekly gain since May 2021, and outpacing other major sectors.

Mark Haefele, chief investment officer at UBS Global Wealth Management, has predicted that European consumer stocks are set to benefit from a recovery in European and Chinese spending. He said that with wage growth starting to pick up, inflation past the peak, and less hawkish central banks, disposable income is set to rise, leading to a rebound in consumer sentiment. The euro zone business activity survey has shown that business activity is gathering pace, further supporting evidence that the economy will avoid a recession.

Shares of Lufthansa rose by 5.7%, pushing it to the top of the STOXX 600, after the German airliner reported a “clearly positive result” for 2022. Meanwhile, Sweden-based Volvo Car AB added 3.4% as sales grew in February. Admiral Group PLC, on the other hand, slumped 3.3% after Citigroup downgraded the insurance provider to “neutral” from “buy”.