European shares rise on hopes of peak interest rates

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Traders hoped that central banks will not push global economies into recession by raising interest rates too high in their fight against inflation, which led to modest gains in European shares on Tuesday.

Europe’s region-wide Stoxx 600 added 0.2 percent, while France’s CAC 40 and Germany’s DAX added 0.1 percent. Trading volumes were expected to remain subdued as US markets were closed for the Independence Day holiday.

The moves echoed the direction in Asia, where shares rose after the Reserve Bank of Australia kept interest rates steady at 4.1 per cent and watched the impact of previous rate hikes on the economy.

Policymakers were guided by a sharper-than-expected decline in the country’s annual inflation rate, which fell to a 13-month low of 5.6 percent in May from 6.8 percent a month earlier. The move encouraged investors who feared central banks would tighten their monetary policy in an effort to stave off persistent price pressures.

Australia’s S&P/ASX 200 stock index rose 0.5 percent after the announcement, while China’s CSI 300 rose 0.2 percent and Hong Kong’s Hang Seng gained 0.6 percent. Japan’s Topix was the top loser in the sector with a fall of 0.6 per cent.

Oil prices rose on Tuesday after Saudi Arabia and Russia, the world’s two biggest producers, announced plans to cut supply in August.

International benchmark Brent crude was trading 0.8 per cent higher at $75.27 a barrel, while US marker West Texas Intermediate rose 0.9 per cent to $70.42.

Germany’s DAX posted the biggest losses in the energy and basic materials sectors, while the Stoxx 600 Basic Resources index fell 0.5 percent.

Meanwhile, new data on Tuesday showed German exports shrank 0.1 percent in May as higher interest rates put pressure on the country’s major trading partners. The reading was well below analysts’ expectations for a 0.3 percent increase.

“Trade is no longer the strong resilient growth driver of the German economy, as it used to be, but rather a constraint,” said Carsten Brzezki, global head of macro at ING. “Expected recession in the US economy. , , High inflation and high uncertainty will clearly have an impact on German exports.

A separate survey by the Ifo economic research institute showed that Germany’s business climate in the chemical industry has worsened significantly, with the sector’s indicator falling from minus 12.5 points in May to minus 28.3 points in June.

Investors prepared to take their next trading signals this week from new economic data, with Friday’s widely anticipated US jobs report expected to provide insight into the Federal Reserve’s next policy move.