European stock markets saw a small increase on Wednesday. This rise was supported by two main factors: growing anticipation of US interest rate cuts and encouraging signs of progress in peace talks for Ukraine.
Investors were also waiting for the UK’s budget announcement later in the day. The main European stock index, the STOXX 600, rose by 0.4%, building on the strong gains it made on Tuesday. Major regional indexes were also up, with both Germany’s and France’s markets gaining 0.5%.
London’s FTSE 100 was up 0.2% as the UK prepared for the budget speech, where the Finance Minister is expected to announce billions of pounds in tax increases. The positive mood in Europe was linked to global investor optimism, which was boosted by weaker US economic data on Tuesday, increasing the likelihood of another Federal Reserve rate cut in December.
Hopes for a Russia-Ukraine peace deal also helped improve investor confidence after the Ukrainian President indicated he was ready to move forward with a U.S.-supported framework to end the conflict. Despite the positive news on peace, defence stocks still saw gains, with their index rising 0.8%. In individual company news, Germany’s athletic wear maker Puma gained 1.9% after its US competitor, Urban Outfitters, reported better-than-expected sales for the third quarter.
On the FX front, the Japanese yen was stronger on Wednesday because of hopes that the Bank of Japan (BOJ) might raise interest rates as early as December.
The New Zealand dollar jumped after its central bank suggested it was likely finished cutting rates. Similarly, the Australian dollar also increased by 0.57% to 0.6506 after its October inflation report was higher than expected, which makes it unlikely the central bank will cut rates further. The euro moved closer to 1.16, reaching 1.1590, partly helped by signs of progress toward a peace agreement between Russia and Ukraine.
Overall, the U.S. dollar was weaker against other major currencies, falling 0.2% to 99.65.
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