PARIS: European shares rose on Tuesday, after mild US inflation data cemented bets the Federal Reserve could skip raising interest rates at its meeting this week, while miners rallied as metal prices jumped after China cut rates.

The pan-European STOXX 600 index closed 0.6% higher, tracking the global market rally.

US consumer prices barely rose in May and the annual inflation increase was the smallest in more than two years, supporting the view that the Fed would keep rates unchanged on Wednesday while adopting a hawkish posture.

“Markets love the idea right now that the Fed might take a break,” said Steve Sosnick, chief strategist at Interactive Brokers.

Traders see a 94% chance of the Fed holding rates at the 5.00%-5.25% range on Wednesday, while pricing in a 60% chance of a rate hike in July, according to the CME FedWatch tool.

The European Central Bank will hold its policy meeting on Thursday, where it is expected to hike rates by another 25 basis points to tame stubborn inflation.

“Comments by ECB speakers over the past few weeks have clearly opened the door to extending the period of possible rate hikes into September, with some officials signalling that several rate hikes after the one expected for June would be needed, while others open the door to a pause,” said Antonio Villarroya, head of G10 macro & fixed income strategy research at Santander CIB, in a note.

The STOXX 600 has traded in a limited 1% range for one week as markets look for more economic data and updates from major central banks to drive a definitive move.

The rate-sensitive tech sector index added 1.4%, while miners jumped 2.7% to a seven-week high.

Industrial metal prices rose after the People’s Bank of China (PBOC) lowered a short-term lending rate for the first time in 10 months to prop up risk sentiment.

China-exposed luxury giant LVMH, also Europe’s most valuable firm, rose 0.9%, while peer Richemont climbed 2.0%.

Meanwhile, German consumer prices, harmonised to compare with other European Union countries, rose by 6.3% on the year in May, data showed.

In UK, wage growth soared and employment jumped in the three months to April, raising expectations that the Bank of England will raise interest rates again, perhaps several times, to contain unrelenting inflationary pressures.

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