PARIS: European shares climbed on Thursday on a boost from luxury stocks after LVMH posted upbeat first-quarter sales, while hopes of a pause in the Federal Reserve’s rate hikes after signs of cooling US inflation also aided sentiment.
The pan-European STOXX 600 rose 0.4%, while the blue-chip index gained 0.5%, inching closer to its highest level in 22 years hit on Wednesday.
LVMH climbed 5.7%, closing at a record high after the world’s largest luxury company reported a 17% jump in first-quarter sales that breezed past estimates as business in China rebounded sharply.
Shares of China-exposed peer Hermes also touched a record high, jumping 3.2%, while other luxury firms Richemont and Kering also rose 4.4% and 2.7% respectively.
France’s luxury-heavy CAC 40 hit a record high for the third consecutive session, closing up 1.2%, while Copenhagen’s OMX 20 also hit an all-time high.
European stocks have more than recouped last month’s declines with gains of 1.4% so far, outperforming the benchmark S&P 500 index on Wall Street, amid ebbing fears of a steep recession in the euro zone.
“European stocks are seen as undervalued compared to their US peers. With the economic outlook for the US deteriorating, investors appear happier now to take advantage of this pricing skew and buy relatively cheaper European shares,” said Stuart Cole, head macro economist at Equiti Capital.
“The risk factor that had been associated with holding European shares is diminishing and this is allowing investment decisions to be made based more on fair value plays.” Euro zone industrial output was stronger than expected in February, data showed on Thursday. Recent US data, including softer consumer and producer prices reports, have fuelled hopes that the Federal Reserve could go easy on future interest rate hikes.
European Central Bank policymakers are converging on a 25 basis point interest rate hike in May, five sources with direct knowledge of the discussion told Reuters.
Healthcare stocks were also a big boost to the STOXX 600, thanks to 1.1% gains in shares of Novo Nordisk, which hit an all-time peak after the drugmaker raised its full-year results forecast.