European shares rose on Wednesday ahead of key U.S. inflation data which will determine whether the Federal Reserve could end its rate hikes soon, while major British lenders climbed after the Bank of England’s stress test.
The pan-European STOXX 600 index (.STOXX) was up 0.7% by 8:33 GMT, extending gains to the fourth straight session.
The U.S. data, scheduled to be released at 1230 GMT, is expected to show the consumer price (CPI) index moderated to 3.1% year-on-year in June after May’s 4% rise, while core inflation is also expected to slow on a yearly basis.
While the reading is unlikely to affect expectations of a 25-basis point rate increase by the Fed in July, it could spur hopes that the U.S. central bank could end its monetary tightening soon after that.
“Softer CPI numbers could be enough for the Fed to pause rather than continuing to hike through the year. (On the contrary), strong numbers could be enough to see everything reversed and stocks under pressure again,” said Stuart Cole, chief macro economist at Equiti Capital.
UK’s Virgin Money (VMUK.L) climbed 7.5% to top the STOXX 600, while shares of Lloyds (LLOY.L), Barclays (BARC.L) and HSBC (HSBA.L) rose between 1.1% and 3% after the Bank of England said Britain’s eight largest lenders showed no capital inadequacies.
“If UK banks were adequately capitalised, that’s probably true of most big European banks,” Cole added.
Gains in the lenders pushed UK’s FTSE 100 index (.FTSE) up 0.8%, while the European banks index (.SX7P) rose 0.9%.
Europe’s technology sector (.SX8P) was the biggest gainer, up 1.7% as semiconductor firms, including Aixtron (AIXGn.DE), ASM International (ASMI.AS) and Infineon (IFXGn.DE), rose between 3% and 4% after Jefferies raised price targets on the stocks.
At the bottom of the STOXX 600 index, Air France-KLM (AIRF.PA) shares fell 4.3% after Deutsche Bank cut the stock to “hold” from “buy”.
Italian Nexi (NEXII.MI) dropped 1.4% after Banco BPM (BAMI.MI) said it would negotiate a payments deal with another bidder. Shares of Banco BPM advanced 1.3%.
Thales(TCFP.PA) rose 2.1% after the French defence group said it had initiated talks to buy supplier Cobham Aerospace Communications for $1.1 billion.
On the euro zone economic data front, Spanish national consumer prices rose 1.9% in the 12 months through June, down from a 3.2% rise in the period through May, a final reading showed.
