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European stocks tick up after Wall Street closes higher

European stocks edged up on Thursday after Wall Street closed the previous session higher, as traders weighed up strong US economic data and the minutes of the Federal Reserve’s latest policy meeting.

The Stoxx Europe 600 gauge was up 0.2 per cent in early afternoon dealings. The regional index on Wednesday had snapped a losing streak after closing lower in each of the four previous trading days, ticking down 1.3 per cent on Tuesday. Various countries in the bloc last week introduced fresh coronavirus curbs in response to surging case numbers.

Germany’s Dax index was up 0.1 per cent, while France’s CAC 40 gauge rose 0.3 per cent. London’s FTSE 100 index gained 0.1 per cent.

Following the reimposition of pandemic restrictions in countries including Germany and the Netherlands, Goldman Sachs on Wednesday slightly lowered its growth expectations for the Euro area for the fourth quarter of this year by 0.2 percentage points to 0.8 per cent. The bank lowered its estimate for the first quarter of 2022 by 0.3 percentage points to 0.6 per cent.

“The downgrade is driven by expectations for renewed weakness in Covid-sensitive services, such as hospitality, arts and entertainment,” the bank noted, adding that any impact on inflation was likely to be small. “[We] look for a sharp growth rebound in Q2, as restrictions are lifted,” it added.

In the US, the blue-chip S&P 500 index had ended the prior day up 0.2 per cent, with the technology-focused Nasdaq Composite gauge closed up 0.4 per cent. Those moves followed fresh data showing that US weekly jobless claims had reached their lowest point since 1969.

Other data showed that a measure of inflation followed closely by the Fed had posted its biggest year-on-year jump in October since the 1990s. The core personal consumption expenditure index posted a 4.1 per cent increase, in line with economists’ expectations but up from 3.7 per cent in September.

Meanwhile, minutes from the Fed’s November policy meeting indicated that officials “stressed that maintaining flexibility” was important as a $120bn-a-month pandemic-era asset-purchasing stimulus programme is withdrawn.

Officials, who are expected to only begin raising rates once such tapering has come to an end, noted that inflation may “take longer to subside than they had previously assessed”.

The US stock market and the Treasury market will remain closed on Thursday for the Thanksgiving holiday.

On Wednesday, the yield on the two-year US Treasury note, which is sensitive to fluctuations in monetary policy, ticked up 0.03 percentage points to 0.64 per cent. Bond yields move inversely to prices.

Tatjana Greil Castro, co-head of public markets at Muzinich & Co, said the Thanksgiving holiday was “an excuse for all markets to be very slow” and that “whatever data we saw yesterday will not be able to be expressed until tomorrow, so we should see very little in terms of movement”.

Arguing that higher energy and food prices were here to stay, she said inflation was likely to prove “sticky” in the longer term.

In European government debt markets, the yield on the 10-year German Bund ticked down about 0.01 percentage point to minus 0.231 per cent on Thursday. Minutes of the most recent European Central Bank meeting are due out later in the day.

Although the Fed, ECB and the Bank of England are yet to begin raising rates, South Korea on Wednesday increased borrowing costs for the second time in three months, following on from the Reserve Bank of New Zealand’s announcement earlier in the week that it would tighten monetary policy.

In Asia, Hong Kong’s Hang Seng share index rose 0.2 per cent. China’s CSI 300 index was down 0.4 per cent.

In currencies, the dollar index fell 0.15 per cent. The euro, which on Wednesday touched its lowest point against the dollar since June 2020, rose back above the $1.12 threshold.

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