Europe: Stoxx 600 little changed as focus shifts to ECB

EUROPEAN shares ended flat on Wednesday as gains in technology shares were offset by losses in real estate shares, while investors shifted their focus to the European Central Bank for its rate decision on Thursday.

The pan-European Stoxx 600 index was little changed on the day.

German shares outperformed European peers as Commerzbank surged 16 per cent, after Italy’s UniCredit bought a 9 per cent stake in the German lender, of which 4.5 per cent was bought from the German government for 702 million euros (S$1.01 billion).

Heavy-weight ASML Holding’s 3.8 per cent gain caused the technology sector to rise but the real estate sector kept the gains in check, falling 0.8 per cent.

Basic resources provided some support, gaining 0.4 per cent, as copper prices rose on a softer US dollar.

Britain’s benchmark FTSE 100 ticked 0.2 per cent lower. The estimates of GDP data showed no change in the UK’s economic output in month-on-month terms in July.

The markets were hawkeyed on US consumer prices that rose slightly in August, but underlying inflation remained sticky amid higher rents and costs for some services, which could discourage the Fed from delivering a half-point interest rate cut next week.

Money markets now see only a 15 per cent chance of a 50 bps cut on Sept 18 by the US central bank as opposed to a 30 per cent chance before the inflation data.

Investors will now shift their focus to the ECB that meets in less than 24 hours and is expected to cut interest rates by 25 basis points.

“Anything other than a 25 bp rate cut from the ECB tomorrow would be a huge surprise to us and the market,” said Joe McConnell, European liquidity strategies portfolio manager at JPMorgan Asset Management.

“The real intrigue will be in Lagarde’s comments about the perceived persistence of inflation and the pace of future rate cuts.”

Investors across the globe approached the markets with caution following the first debate between US presidential candidates Kamala Harris and Donald Trump, which took place overnight. The debate lacked specific details, but betting markets shifted in favour of Harris after the event.

Among other individual movers, Rentokil slumped 20 per cent, after the British pest control firm flagged a slowdown in its North American revenue and said it would cut jobs.

Inditex rose 4.5 per cent, lifting the retail sector to the top, after the Zara owner reported stronger recent sales of its first autumn-winter collections. REUTERS