European shares advance as bond yields ease ahead of U.S. Fed's interest rate decision (updated)

Talanx AG

20/09/2023 09:37

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        * 
      Surprise fall in UK inflation adds to bets on BoE rate
hike
pause
    

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      German producer prices post biggest decline on record
    

        * 
      Bond yields across Europe ease ahead of U.S. Fed rate
decision
    

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      STOXX 600 up 0.9%
    

  
 (Updated at 1552 GMT)
    By Bansari Mayur Kamdar and Shashwat Chauhan
       Sept 20 (Reuters) - European shares rose in a
broad-based rally on Wednesday as government bond yields across
the continent fell, while investors eyed the U.S. Federal
Reserve's verdict on monetary policy tightening later in the
day. 
    The pan-European STOXX 600 index  .STOXX  added 0.9%
following two consecutive sessions of losses.
    Real estate stocks  .SX86P , often considered a bond proxy,
advanced 2.2% as government bond yields fell.  GVD/EUR 
    In Britain, gilt yields notched a bigger decline and the
pound  GBP=  dropped after data showed Britain's high inflation
rate unexpectedly slowed in August, raising the prospect of the
Bank of England (BoE) pausing its long run of interest rates
hikes as soon as Thursday.
    "The softness in today's inflation data came as a shock to 
us, the market and the BoE," strategists at BNP Paribas wrote in
a note. 
    "The (BoE's) Monetary Policy Committee would continue to
monitor closely indications of persistent inflationary pressures
and resilience in the economy as a whole, including the
tightness of labour market conditions and the behaviour of wage
growth and services price inflation."
    Britain's FTSE 100  .FTSE  added 0.9%, while the personal
and household goods sector  .SXQP , which houses the country's
major homebuilders, gained 0.7%.
    Euro zone banks  .SX7E  jumped 2.0%, as Italy's UniCredit
 CRDI.MI  surged 4.7%
    Traders pointed at CEO Andrea Orcel's "bullish" statements
in a conference for the rise. 
    Commerzbank  CBKG.DE  added 1.6% after the German lender's
finance chief said on Tuesday it expects to earn net interest
income of 8 billion euros ($8.5 billion) this year, as it
benefits from higher interest rates.
    Investor focus will be on the Fed's policy decision due at
1800 GMT, where the U.S. central bank is expected to stand pat
on interest rates.
    In Germany, producer prices posted their biggest
year-on-year decline in August since data collection began in
1949, spurring hopes for further easing of inflation in Europe's
largest economy.
    Among other individual stocks, Just Eat Takeaway  TKWY.AS 
jumped 7.1% after a federal judge said on Tuesday the company's
U.S. unit Grubhub and other food delivery groups can sue New
York City over a law capping how much it can charge restaurants
for delivering meals.
    Talanx  TLXGn.DE  slipped 10.0% after the German insurer on
Tuesday initiated a capital increase of up to 300 million euros
($320.4 million).
    Delivery Hero  DHER.DE  rose 7.1% after the German food
delivery group confirmed talks on a partial sale of its Asia
business.

 (Reporting by Bansari Mayur Kamdar and Shashwat Chauhan in
Bengaluru; Editing by Sherry Jacob-Phillips, Varun H K and Alex
Richardson)
 ((Shashwat.Chauhan@thomsonreuters.com))