Europe close: Stoxx 600 near two-year high on rate-cut hopes

(Sharecast News) - European stocks closed at their highest levels in nearly two years on Tuesday on the back of monetary easing hopes as economic data confirmed that eurozone inflation had fallen to its lowest in over two years. The Stoxx 600 finished 0.36% higher at 477.04, its highest close since January 2022, with indices across the continent all finishing in positive territory.

"It seems investors are determined to drive stocks higher in the week before Christmas, with no sign of profit taking in sight," said Chris Beauchamp, market analyst at IG.

Markets extended early gains after final inflation figures early on in the session confirmed flash data showing that annual price growth in the eurozone fell to 2.4% in November from 2.9% in October - in line with expectations.

"As things stand, core inflation momentum is now substantially weaker than what the ECB's December forecasts imply, suggesting that the central bank's projections will have to be revised downwards in Q1 2024 if current trends hold," said analysts at Oxford Economics. "This bolsters our view that rate cuts may start as early as April next year."

Sentiment was also lifted by a positive start on Wall Street as optimism continues to increase that the Federal Reserve will move to cut rates next year.

On Tuesday, the head of the Richmond Fed, Thomas Barkin, said in an interview with Yahoo Finance that the central bank was making "good progress" on its fight against inflation, and that recent "data has come in pretty nicely". He cautioned from using the Fed's recent projections for interest rates as solid guidance, but said: "If you're going to assume that inflation comes down nicely, then of course we'd respond appropriately."

Aircraft orders move Airbus

Shares in French plane manufacturer Airbus gained after Deutsche Lufthansa ordered 40 Airbus A220-300s, along with options for an additional 40 aircraft from the Airbus A320 family. A general meeting of shareholders at EasyJet, meanwhile, signed off its planned purchase of 157 A320neo family aircraft.

German carmaker Volkswagen edged higher after reaching a deal to reduce administrative staff costs by 20% in an effort to save up to €4bn in 2024.

In London, luxury group Burberry was lower after broker Jefferies cut its price target on the shares to 1,600p from 1,800p, citing ongoing weakness in the US and Europe and a tough backdrop in China.