(Bloomberg) -- European stocks drifted higher on the last day of the month that saw a reassuring US inflation reading and kept rate cuts hopes alive. 

The Stoxx Europe 600 added 0.2% Thursday to extend February’s gain to 1.8%, a fourth month of advances and the longest winning streak since 2021. 

The core personal consumption expenditures index, the Federal Reserve’s favored inflation gauge, rose 2.8% in January in line with expectations. On Wednesday, Federal Reserve Bank of New York President John Williams sought to temper market bets on a pivot to easier policy, saying there’s still ways to go to reaching the central bank’s 2% inflation target.

“It’s rather good news that the Fed’s favorite inflation gauge is slowing,” said Benoit Peloille, chief investment officer at Natixis Wealth Management.

Media, construction and material stocks were the best performers, paced by CRH Plc. Renewable stocks extended gains, fueled by the inflation print, with Nordex among the biggest gainers. Underperformers included healthcare and food, beverage and tobacco stocks.

After hitting a record high last week, European stocks have slightly retreated. Strategists on average expect European stocks to post little or no gains for the rest of the year, but bullish views are building.

“Equities should benefit marginally, but more important for risk assets will be tomorrow’s ISM and PMI numbers,” said Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin. 

Meanwhile, Citigroup’s Beata Manthey has a constructive view on equities and sees top European mega-caps as cheap. The group, dubbed the ‘Super 7’ and including Novo Nordisk A/S, ASML Holding NV, LVMH, SAP SE, Schneider Electric SE, Richemont and Ferrari NV has underperformed the Magnificent 7 in the US, leaving room for catch-up, she said.

Among individual stocks, Grifols SA plunged most on record after announcing it will generate less cash this year than investors were expecting, adding to wider concerns sparked by a shortseller attack last month. Grocery delivery company Ocado Group Plc rose after saying it was making progress on rolling out its automated technology. Consumer-health company Haleon Plc was among the best performers in the overall gauge after reporting stronger growth last quarter. AMS-Osram AG tumbled after the unexpected cancellation of a key project.

For more on equity markets:

  • Inflation Reality Check to Test Europe’s Bull Run: Taking Stock
  • M&A Watch Europe: Covestro, Amadeus, Better Collective
  • Klarna Weighing US IPO Shows Europe Continuing to Lag: ECM Watch
  • US Stock Futures Fall; WW International, DoubleVerify Fall
  • Reckitt Hit by Slowing Inflation: The London Rush

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--With assistance from Julien Ponthus.

(Updates with US inflation data impact. A previous version of this story corrected the spelling of AMS-Osram.)

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