By Paolo Laudani, Sruthi Shankar and Johann M Cherian
(Reuters) -European shares closed lower on Thursday, with defense and industrial stocks leading the losses, after data showed U.S. inflation ticked higher as investors waited for France to unveil its 2025 budget.
The pan-European index fell 0.2%, with defence, industry and technology losing more than 1% each.
German government bond yields, which typically respond to U.S. data, pared declines but remained at one-month highs, also putting pressure on stocks. [GVD/EUR]
US consumer prices rose slightly more than expected in September, but the annual increase in inflation was the smallest in more than three and a half years.
However, the report did little to dent expectations that the Federal Reserve would cut rates by 25 basis points at its November meeting, CME Group’s (NASDAQ:) FedWatch Tool showed.
“It is still above target, but lower than the Fed Funds rate, so that means the Fed still has room to maneuver,” said Yvan Mamalet, senior market strategist at SG Kleinwort Hambros.
Closer to home, markets expect the European Central Bank to cut rates by almost 50 basis points by the end of the year, LSEG data shows.
The minutes of the September ECB meeting showed that policymakers appeared satisfied with the decline in inflation, but called for gradual policy easing in the face of persistent price pressures.
The STOXX 600 has been choppy this week as uncertainty surrounding Beijing’s stimulus plans weighed on sentiment. China’s Finance Ministry will outline plans for fiscal stimulus at a much-anticipated press conference on Saturday.
The French government will unveil its 2025 budget later on Thursday, with plans for 60 billion euros in tax increases and spending cuts to tackle the rising budget deficit.
Markets are likely to keep a close eye on whether the budget can pass through Parliament without being watered down too much.
Mamalet said it is very difficult to make a strong judgment on the impact of the budget because what parliament has agreed on could look very different from what was initially presented.
Among individual stocks, GSK rose 3.2% after the British drugmaker agreed to pay up to $2.2 billion to settle U.S. lawsuits alleging that its discontinued heartburn drug Zantac caused cancer. The figure was smaller than some analysts had feared.
Shares of Italy’s fourth-largest bank BPER rose 8.2% to the top of the country’s main index after the lender submitted a new business plan for 2024-2027.
Deutsche Telekom (OTC:) rose 1.7% after saying it expects its net sales to rise an average of 4% a year through 2027, helped by artificial intelligence and automation.
