European shares rose sharply on Tuesday in a broad-based rally, led by chipmakers, travel and leisure companies, and some strong corporate updates, with investors eyeing producer price data due later in the day.
The region-wide STOXX 600 index was up 2% by 0827 GMT, hitting its highest level since Sept. 23.
Equities in the region tracked a solid rally on Wall Street overnight after data showed U.S. manufacturing activity rose at its slowest pace in nearly 2-1/2 years in September as rising rates cooled demand for goods.
London’s blue-chip FTSE 100 index rose 1.5%, building on gains from the previous session after the UK government reversed parts of its controversial tax cut plans.
German DAX and Italy’s FTSE MIB added 2.3% each, while France’s CAC 40 climbed 2.7%.
The recent rebound is because central banks have started getting soft, Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said, noting the Bank of England’ recent intervention to support the gilt market and Reserve Bank of Australia’s smaller-than-expected rate hike.
“We now see a rebound in the stock, bonds, gold, oil everything on board, but we shouldn’t forget that volatility remains high. So, big jumps are also a sign that there is high volatility and that itself is a sign that the market conditions are quite stressful,” she said.
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Investors’ focus is on data due at 0900 GMT which will likely show euro zone producer prices accelerated further in August, with a likely annual jump to 43.1% from 39.5% in July.
Last week, data showed consumer prices zoomed past forecasts to hit a record 10% in September, reinforcing expectations for another jumbo interest rate hike later this month.
The STOXX index has fallen 18.3% so far this year as the region grapples with an energy crisis exacerbated by the Russia-Ukraine conflict and hawkish signals from the U.S. Federal Reserve and other major central banks to tame inflation.
On Tuesday, all of the STOXX 600’s sectoral indexes gained, led by a 4% jump in travel and leisure stocks and 3.6% in technology sector.
Chipmakers ASML, Aixtron, STMicroelectronics, Infineon, ASM International, BE Semiconductor and Nordic Semiconductor climbed between 3.7% and 5.7% after optimistic forecast from Taiwan’s Foxconn and Samsung Electronics’ chip contract manufacturing unit.
Sika gained 4.3% after the chemicals maker raised its full-year sales forecast and launched the sale of an 850 million Swiss franc ($858.50 million) chunk of the former BASF business it bought last year.
Greggs surged 8.8% after the British baker and fast food chain said it traded well in its latest quarter, showing its resilience against the backdrop of a worsening cost of living squeeze.
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