European stocks clock best week in nearly eight months

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German share price index DAX graph is pictured at the stock exchange in Frankfurt

By Shreyashi Sanyal and Ankika Biswas

(Reuters) -European shares notched their best weekly performance in nearly eight months on Friday, largely driven by bets of smaller rate hikes by the Federal Reserve and easing COVID-19 curbs in China.

The STOXX 600 index ended the session up 0.1% at a 11-week high, with financial services, mining and retail stocks leading the gains.

The index marked weekly gains of 3.7%, mostly after data on Thursday showed U.S. consumer prices cooled more then expected in October, leading to expectations that the Federal Reserve could temper its size of future interest rate hikes.

“The market’s just waiting for signals that the initial interpretation to the U.S. CPI numbers yesterday is the correct one,” said Andrea Cicione, head of research at TS Lombard.

Further, news of China easing some of its strict COVID-19 rules kept investor sentiment buoyant, boosting shares of miners and luxury goods retailers.

China-exposed luxury giants Hermes International, Kering, and LVMH jumped between 2.4% and 2.8%. Richemont too soared 10.5% on better-than-expected sales and margins.

The European basic resources jumped 2.6% as prices of base metals shot up. [MET/L]

“Markets are welcoming looser COVID rules in China, but infection numbers are elevated and vaccination rates are low, which means that the path to complete removal of restrictions still looks long,” strategists at ING wrote in a client note.

An upbeat earnings season and hopes of smaller rate hikes from the U.S. central bank have helped the benchmark index stretch gains to a fourth straight week, as investors set aside concerns about the European economy slipping into recession.

Analysts said this profit growth could, however, dry up in Europe in a matter of months as high inflation and recession rattle the economy.

Germany’s inflation continued to rise at an alarming pace as data showed consumer prices, harmonised to compare with other European countries, was 11.6% higher year-on-year in October.

Among stocks, Europe’s largest mobile phone tower operator, Spain’s Cellnex, gained 1.6% after posting a 45% rise in nine-month core earnings.

Delivery Hero jumped 8.8% as analysts raised their price targets on the German takeaway food company’s shares a day after it forecast positive adjusted core profit margin for next year and reassured investors of reaching profitability.

(Reporting by Shreyashi Sanyal and Ankika Biswas in Bengaluru; Editing by Savio D’Souza, Uttaresh.V and Shailesh Kuber)