© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 29, 2023. REUTERS/Staff/File Photo
By Ankika Biswas
(Reuters) – Europe’s benchmark stock index hit a near two-year high on Tuesday with energy and banks stocks leading the charge, as investors entered 2024 with undeterred hopes that major central banks might finally deliver interest rate cuts.
The pan-European was up 0.4% by 0920 GMT, hitting a 23-month high, after a long weekend for New Year Day holiday.
Expectations of softer monetary policy drove a 12.7% jump in the benchmark index in 2023, almost fully rebounding from a 12.9% slump in the previous year after major central banks unleashed rapid rate hikes to conquer spiralling inflation.
“All eyes at the start of 2024 are on the near-term inflation prints—which will be instrumental for the European Central Bank’s (ECB) policy decisions in Q1,” said analysts at Pantheon Macroeconomics.
“Specifically, the ECB is fine with the idea of rate cuts in 2024, just not in the first half of the year.”
The ECB broke its longest streak of rate hikes in its 25-year history in October.
Signs of economic woes were underscored by a survey showing euro zone factories ended 2023 on the back foot, with activity contracting in December for the 18th straight month.
Among major economies, German manufacturing activity continued to contract although expectations for future business turned positive for the first time since April.
The German benchmark , however, jumped 1%, outperforming most of its regional peers.
Among major sector gainers, eurozone banks jumped to their highest level since May 2018, led by a 2%-3.7% rise in Italy’s Monte dei Paschi, Spain’s Sabadell and BBVA (BME:).
Energy shares also advanced 1%, tracking higher oil prices.
Shipping companies Maersk, Hapag-Lloyd and Frontline (NYSE:) climbed 2%-4.4% as attacks on vessels in the Red Sea continued, lifting investors’ hopes for higher freight rates.
French automotive supplier Valeo (EPA:) rose 3.1% following the appointment of new Chief Financial Officer.
Nokia (HE:) lost as much as 1.7%, before turning positive, after the Finnish telecom gear group said it would not meet its financial targets for the year.
Exchange operator Euronext is experiencing a technical issue causing incorrect index calculation on 79 different indices that include components listed in Helsinki and Stockholm.
Financials and food and beverage were the only sectoral laggards, down 0.1% each.
