european stocks

European Stocks Gain After French Industrial Output Surge

Stocks in the European markets climbed on Friday after the US Senate passed legislation to suspend the debt ceiling and a better-than-expected recovery in French industrial output in April.

The STOXX 600 index surged 0.9%, putting more distance from a two-month low reached on Wednesday.

Germany’s DAX index also gained 1.0%, France’s CAC 40 climbed 1.2%, and the UK’s FTSE 100 rose 0.9%.

Debt Ceiling’s Senate Passage, French Data Offer Optimism

Following the House of Representatives’ approval, the US Senate on Thursday passed bipartisan legislation backed by President Joe Biden that postpones the government’s $31.4 trillion debt limit for two years, providing investors relief after more than a month of worrying over the deal’s outcome.

The bill now requires Biden’s signature for it to be officially a law before the June 5 deadline that marks the country’s default, which could have serious repercussions for the global economy.

Market sentiment in Europe also improved on the latest French industrial production data showing a 0.8% increase in April, beating expectations of a 0.3% surge and ending significantly better than the 1.1% decline in the previous month.

The reading followed a more substantial retreat of 6.1% in eurozone inflation in May from 7.0% logged the prior month. The fall pushed the region’s inflation to its lowest since February 2022.

More robust industrial output in France also begged the question of to what extent the European Central Bank (ECB) can tighten its monetary policy.

ECB President Christine Lagarde said interest rate hikes need to continue, as inflation in the region remained elevated, even if it is becoming apparent that past increases are starting to have an effect.

On the other hand, ECB Executive Board Member Fabio Panetta indicated the central bank does not have much to go with policy tightening, considering they ‘have already come a long way.’

Since July 2022, the ECB has raised interest rates by a combined 375 basis points (bps) and announced another hike this month, despite observing cooler inflation data last month. Economists, however, suggested a more uncertain outlook for the next two months.

User Review
0 (0 votes)


Leave a Reply