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European Shares Gain After Wall Street Record, Powell in Focus

(Bloomberg)

(Bloomberg) -- European shares advanced, tracking a fresh record for US equities, as focus turned to testimony by Federal Reserve Chair Jerome Powell.

The Stoxx 600 was 0.9% higher at the close in London, with real estate outperforming, while chemicals and media lagged. France’s CAC 40 Index was 0.9% higher, reversing three sessions of declines. Spanish gas utility Enagas SA advanced as it agreed to sell its 30% stake in a US pipeline firm for $1.1 billion.

Powell is concluding two days of hearings with an appearance before the House Financial Services Committee. On Tuesday, he was careful not to offer a timeline for interest-rate cuts, while on Wednesday he told lawmakers that policymakers have more work to do on trimming their balance sheet.

In France, President Emmanuel Macron’s former prime minister, Edouard Philippe, called for parties of the center and center-right to join forces to form a new government. The country’s main index is almost flat year-to-date.

The rally in European shares has stalled amid the political turmoil following the French elections, while the focus will now turn to Thursday’s US inflation data and the upcoming corporate earnings season. 

Deutsche Bank strategists expect European firms to beat profit expectations by a weaker margin than in the first quarter, weighed down by recent disappointment in macro data.

“Shortly before the start of the reporting season, the markets are in a narrow range with moderate volume,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. “The economic slowdown can be reflected in corporate results, which central banks need to monitor very closely to avoid disappointment.”

Over in the UK, traders trimmed odds that the Bank of England will deliver an interest-rate cut at its upcoming decision after Chief Economist Huw Pill emphasized that inflation remains persistent in the UK. 

Among individual moves, Volkswagen ended the day up 1.1% after fluctuating earlier. The German carmaker said it would potentially shutter an Audi electric-vehicle factory in Belgium to save costs, in what would be a watershed moment for the company.

For more on equity markets:

  • Bad Economic News Can’t Be Ignored For Too Long: Taking Stock
  • M&A Watch Europe: Equals, Enagas, CPP Investments, Aramco
  • Private Equity Deals Dent Europe’s IPO Pipeline: ECM Watch
  • US Stock Futures Unchanged; Aehr Test Systems, Smart Global Gain
  • Water Pressure: The London Rush

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--With assistance from Michael Msika.

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