Real estate, tech drive European shares higher on bets of Fed rate-hike cycle end

By Ankika Biswas

(Reuters) – European shares climbed over 1% on Thursday, led by rate-sensitive real estate and technology stocks, as investors bet on the possibility of an end to the U.S. monetary policy tightening after the Federal Reserve held interest rates steady.

The pan-European index gained 1.6% at 0930 GMT, touching a fresh two-week high.

Fed Chair Jerome Powell maintained the option of another hike if progress on inflation stalls, but said that a rise in market-based interest rates may begin to weigh on the economy.

“Powell acknowledged that a rise in long-term yields have tightened financial conditions… our read of the press conference is that it supports our view that the Fed is done with hikes,” said Mohit Kumar, chief economist Europe at Jefferies.

Euro zone government bond yields dropped tracking their U.S. peers, with Germany’s two-year yield sliding to a two-month low, driving a 4.9% surge in the bond proxy real-estate sector to a three-week high.

The technology sector also rose 3.2% to a three-week high.

Focus now switches to the Bank of England’s policy decision later in the day, widely expected to keep rates unchanged.

Investors also took stock of data showing euro zone manufacturing activity took a further step back last month in a broad-based downturn, with new orders contracting at one of the steepest rates since 1997.

Another set showed German unemployment rose more than expected in October, showing some cracks in an otherwise resilient labour market.

Further, Dutch ECB governing council member Klaas Knot noted that holding rates staying at current levels in coming months, as it waits for further confirmation of falling inflation.

A handful of earnings were also on investors’ watch list.

Swiss staffing company Adecco (SIX:) Group was the top STOXX 600 gainer with a 13.3% increase after reporting a better-than-expected third-quarter net profit.

Shell (LON:) gained 1.7% following in-line third-quarter earnings of $6.2 billion and an increased share buyback programme.

Novo Nordisk (NYSE:) rose 2% as it expects another year of double-digit sales growth for its two most popular drugs, even after cautioning that shortages of its Wegovy weight-loss injection would continue in the short to medium term.

Meal delivery firms Just Eat Takeaway Delivery Hero, HelloFresh (OTC:) Deliveroo (OTC:) gained between 3.2% and 7.8% following U.S. peer DoorDash (NASDAQ:)’s strong fourth-quarter core profit forecast.

Meanwhile, ING fell 2.8%, with analysts pointing to a poor beat in third-quarter net profit and to a net interest income miss.

Of the STOXX 600 companies that have reported so far, 57.6% topped earnings estimates.