Share

European stocks close higher ahead of Fed decision; UK GDP growth boosts sentiment

Jenni Reid
Holly Ellyatt

This is CNBC's live blog covering European markets.

European markets closed higher Wednesday as investors look ahead to a widely expected announcement of a pause in rate hikes from the Federal Reserve.

The benchmark Stoxx 600 index provisionally ended 0.5% higher, with most sectors in positive territory. Mining stocks climbed 2.5% to lead gains, while travel and leisure stocks dipped 1.1%.

European markets


Figures on Wednesday showed the U.K. economy grew by 0.2% in April, in line with expectations, with growth driven by services.

Sterling gained 0.6% against the U.S. dollar and 0.5% against the euro. Meanwhile, the yield on 2-year U.K. government bonds dipped 3 basis points to 4.853% after shooting to its highest level since 2008 on Tuesday on the back of a strong jobs report showing record wage growth.

The FTSE 100 index was 0.2% higher, aided by a nearly 1% uptick in shares of oil giant Shell, which announced plans to hike its dividend and increase share buybacks while cutting costs. It also ditched a previously announced pledge to cut oil production each year until 2030.

Global markets have also been digesting the latest U.S. inflation data, which showed price pressures slowed again in May, adding to investor optimism that the Federal Reserve could skip a rate hike when it decides on policy today.

The consumer price index in May increased 4% year over year, marking the slowest annual rate since March 2021.

Following the report, traders increased their bets that the Fed will keep rates unchanged on Wednesday after hiking at 10 consecutive meetings. There's an over 95% chance the central bank would keep rates at the current target rate of 5% to 5.25%, according to CME Group's FedWatch tool.

Investors also await a monetary policy announcement from the European Central Bank on Thursday.

Asia-Pacific markets were mixed Wednesday, while S&P 500 futures traded slightly higher.

A rate cut in December wouldn’t require Fed to abandon ‘higher for longer’ narrative, UBS says

A rate cut in December wouldn't require Fed to abandon 'higher for longer' narrative, UBS says
watch now
VIDEO2:4802:48
December rate cut won't require Fed to abandon higher for longer narrative: UBS
Squawk Box Europe

Arend Kapteyn, chief economist at UBS, explains why stock markets are unlikely to be rattled by the U.S. Federal Reserve's announcement on Wednesday.

Vodafone agrees mobile business merger with CK Hutchison

British telecoms giant Vodafone and CK Hutchison, owner of mobile network Three UK, agreed to merge their U.K. businesses Wednesday, following talks that have been ongoing since last year.

Read more here.

Stock Chart IconStock chart icon
hide content
Vodafone Group share price.

European Central Bank set to inch closer to the end of its hiking cycle as inflation slows

The European Central Bank is set to increase its benchmark policy rate by another 25 basis points Thursday, insisting that all future rate decisions will be strictly data dependent as uncertainty weighs over the inflation and growth outlook.

"Weaker economic data, the significant easing on the energy markets and the recent surprisingly sharp drop in inflation argue for an early end to the interest rate cycle," said Fritzi Köhler-Geib, a chief economist with German bank KfW, in a research note to clients.

"On the other hand, growing wage pressure and falling but still high inflation expectations call for caution."

Read the full story here.

— Annette Weisbach

Europe stocks higher

After a choppy start, European stock markets moved higher through the first hour of trade.

The pan-European Stoxx 600 index was up 0.3%, with France's CAC 40 up 0.44%, Germany's DAX up 0.26% and the U.K.'s FTSE 100 up 0.08%.

Stock Chart IconStock chart icon
hide content
Stoxx 600 index.

— Jenni Reid

UK economy records 0.2% growth in April

U.K. gross domestic product grew by 0.2% in April, in line with economist expectations.

The Office for National Statistics said growth was mainly driven by the services sector, which expanded 0.3%, as production output fell by 0.3% and the construction sector dropped 0.6%.

It follows 0.3% GDP contraction in March and 0.1% growth for the first quarter as a whole, with the International Monetary Fund and Bank of England both forecasting the economy will dodge a recession.

British Finance Minister Jeremy Hunt said: "We are growing the economy, with the IMF saying that from 2025 we will grow faster than Germany, France and Italy. 

"But high growth needs low inflation, so we must stick relentlessly to our plan to halve the rate this year to protect family budgets."

Ruth Gregory, deputy chief U.K. economist at Capital Economics, said the GDP rise was not as good as it seemed, noting the "full drag" from higher interest rates was yet to be felt and forecasting a recession in the second half.

— Jenni Reid

China’s real estate slump is predicted to last for years

Economists on Wall Street are warning weakness in China's property market could be a drag on the economy for years to come.

"We see persistent weaknesses in the property sector, mainly related to lower-tier cities and private developer financing, and believe there appears no quick fix for them," Goldman Sachs economists led by China economist Lisheng Wang said in a weekend note.

Goldman's economists said the property market is expected to see an "L-shaped recovery" — defined as steep declines followed by a slow recovery rate.

Morgan Stanley in an outlook report added should monetary easing measures fail to support the ailing sector, it will also lead to concerns of a spillover effect in the rest of the Asia-Pacific region.

A "downside risk would be if China's property sector does not stabilize even with the easing we expect," they said. "In that scenario, confidence and financial conditions will tighten in China, which will have direct implications for China's growth but also will negatively spill over to the region."

– Jihye Lee

CNBC Pro: This U.S. stock has risen 10% every year for the past decade — and analysts see more upside ahead

One U.S.-listed stock has risen by more than 10% every year for the past 10 years.

It is the only major stock among 85,000 to have posted such consistent returns, CNBC Pro has found.

Investment bank analysts also expect the stock to rise by 19% over the next 12 months.

CNBC Pro subscribers can read more here.

— Ganesh Rao

CNBC Pro: Analysts reveal a $12 billion opportunity to tap the AI buzz, naming stocks to play it

There's one corner of the semiconductor sector that analysts are particularly bullish on to play the artificial intelligence theme.

Bank of America expects the segment to reach $12 billion by 2027.

Here's how to play it, according to the analysts.

— Weizhen Tan

European markets: Here are the opening calls

European markets are heading for a flat open Tuesday.

The U.K.'s FTSE 100 index is expected to open 5 points lower at 7,580, Germany's DAX 3 points lower at 16,190, France's CAC 3 points lower at 7,301 and Italy's FTSE MIB 37 points lower at 27,835 according to data from IG.

Data releases include euro zone current account figures for April.

— Holly Ellyatt