By Johann M Cherian
July 3 (Reuters) – Europe’s benchmark STOXX 600 hovered near a record high on Friday and was set for its biggest weekly gain in over a month, underpinned by gains in cyclical stocks and as investors pushed back expectations for an imminent U.S. interest rate hike.
The pan-European STOXX 600 briefly hit a record high earlier in the session and was last up 0.2% at 649.86 points by 0806 GMT. The index was set for its biggest weekly rise since mid-May. Germany’s DAX index also notched an all-time high and was up 0.5%.
German industrial group Siemens jumped 1.7% and was the biggest boost to the DAX after brokerage Kepler Cheuvreux upgraded the stock to “hold” from “reduce”.
Defence stocks were marginally higher as Russia bombarded Ukraine with its deadliest strike this year. Investors anticipate more defence spending and output in times of geopolitical tensions.
Defence stocks have seen the strongest gains this week, along with cyclicals such as industrials, banks and financial services as the rally, previously concentrated in tech stocks, broadened, aided by easing Middle East tensions.
A lukewarm U.S. jobs report boosted expectations that the Federal Reserve may wait until later in the year before raising rates, while global business activity reports broadly suggested a resilient economy.
Earlier this week, Euro zone data indicated that inflation rose at a slower-than-expected pace in June and European Central Bank President Christine Lagarde said that risks to inflation and economic growth were now more balanced than a few weeks earlier.
“While ECB speakers have generally tried to hang on to a hawkish tone, President Christine Lagarde and others have conceded that the policy response may not need to be that aggressive from here,” ING Bank said in a note.
“Lower-than-expected June CPI this week and oil prices staying stubbornly low mean that some second-round effects on core inflation may well be needed for the ECB to hike again.”
Traders now see the ECB hiking rates by a total of 23 basis points this year, LSEG data showed.
Tech stocks logged their biggest quarterly gain since 2001 on Tuesday, owing to the AI-led global rally. On Friday, chip stocks Soitec and Aixtron gained 4.1% each, while BE Semiconductor added 3.6%.
French voucher and benefits company Pluxee gained 5.3% after posting a smaller-than-expected drop in organic sales in the third quarter.
Personal & Household Goods led sectoral declines, with L’Oreal
Trading volumes are expected to be thin on account of a U.S. public holiday.
(Reporting by Johann M Cherian in Bengaluru; Editing by Sonia Cheema)
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