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European Market Insights: Economic Data Sparks Optimism, UK Elections in Focus

European shares rose on Thursday, buoyed by optimism regarding potential U.S. interest rate cuts following soft economic data. This optimism was mirrored in London markets, which gained traction as voting commenced in the UK with opinion polls predicting a historic victory for the Labour party.

The pan-European STOXX 600 index increased by 0.4% by 0816 GMT, with significant contributions from the automobiles and parts sub-index, which rose by 1.3%. German automotive supplier Continental notably saw a 10.1% jump in shares, attributed to positive pre-close comments on its auto unit.

The UK’s FTSE 100 also advanced, gaining 0.7%, as markets closely monitored the potential majority win by the Labour Party. Market strategist Bas van Geffen from Rabobank indicated that the widely expected Labour victory might not significantly impact markets unless an unexpected outcome arises, suggesting that the possibility of a Labour win had already been factored into market expectations.

European Market Insights: Economic Data Sparks Optimism, UK Elections in Focus

European Market Insights: Economic Data Sparks Optimism, UK Elections in Focus

French stocks followed suit, rising by 0.6% as political maneuvers intensified to prevent France’s National Rally from gaining power.

In the U.S., weak economic data, particularly the increase in first-time applications for unemployment benefits, signaled a cooling labor market and bolstered sentiment around possible rate cuts. Concurrently, German industrial orders unexpectedly fell by 1.6% in May, marking a surprising decline on a seasonally and calendar-adjusted basis.

Individual stock movements saw notable gains, such as UK’s Smith & Nephew rising by 6.3% after activist investor Cevian Capital revealed a 5% stake in the company, and Germany’s Redcare Pharmacy surging 10.4% following a significant increase in second-quarter preliminary sales.

Conversely, not all stock movements were positive. Roche experienced a 2.2% drop after announcing the halt of a trial for its experimental lung cancer drug due to disappointing results. France’s Pluxee fell by up to 10% after reporting weaker-than-expected third-quarter sales in Europe.

Sweden’s Ericsson also slipped by 0.9% following the announcement of another impairment charge amounting to 11.4 billion Swedish crowns in the second quarter of 2024.

As the trading day progressed, investors were also awaiting comments from European Central Bank officials for further insights into the central bank’s future interest rate policies. Trading volumes were anticipated to be low due to a public holiday in the United States, which typically results in subdued market activity.

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