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  • Writer's pictureThe San Juan Daily Star

European shares lose ground on real estate, tech losses

European shares ended lower on Wednesday, pressured by losses in real estate and technology stocks, while UK stocks were buoyed by metal miners as investors digested its inflation data.

The pan-European STOXX 600 closed down almost 0.2%, with the real estate sector falling 1.2% and technology stocks dropping 1.1%.

Basic resources stocks added 0.6%, tracking a rebound in metal prices and leading sectoral gains. [MET/L]

Britain’s FTSE 100 reversed earlier losses to close up 0.2%. Data showed UK inflation returned to its 2% target in May for the first time in nearly three years, but underlying price pressures remained strong, meaning the Bank of England (BoE) is likely to wait longer before cutting interest rates.

Global stocks hit record highs on Wednesday, driven by a rally in tech shares that has made AI chipmaker Nvidia the world’s most valuable company, while the dollar stalled as soft U.S. retail sales data suggested rates could fall this year.

MSCI’s All-World index was up 0.15% at 805.12, having traded at an all-time high of 805.43.

A burst higher in U.S. tech stocks on Tuesday allowed Nvidia to dethrone Microsoft, which boosted shares in chipmakers in Asia overnight.

U.S. stock index futures also rose, with those on the tech-heavy Nasdaq 100 up 0.23% and those on the S&P 500 up 0.1%. In Europe, the STOXX 600 fell 0.1%.

The pound rose after data earlier showed British inflation returned to the Bank of England’s 2% target in May for the first time since 2021.

The fall in inflation will be welcomed by both Prime Minister Rishi Sunak and the BoE - but likely has come too late either to turn around Sunak’s fortunes at next month’s election or to prompt a rate cut from the central bank on Thursday.

“With UK inflation at 2% and inflation in the U.S. - if you take PCE - at 2.7%, this is hardly disruptive,” Lombard Odier economist Samy Chaar said, referring to the Federal Reserve’s preferred inflation measure the Personal Consumption Expenditures index.

“It gives credibility to the idea that the Bank of England act in August at the latest and then that should be followed by the Fed in September,” he said.

Sterling, which is down around 0.2% so far this month, last traded at $1.2728, up 0.15%, while the euro rose 0.1% to $1.0747, but was still down 1% in June.

The single currency has been under pressure since French President Emmanuel Macron called a snap election last week after his ruling centrist party was trounced by the far right in the European Parliament elections.

“Economies are stagnant, but no worse. So the cost of being too dovish on inflation and seeing it re-accelerate is a greater risk for (the BoE) than keeping things tighter for another meeting or two in search of more data,” said Richard Flax, chief investment officer at Moneyfarm.

Market focus will now shift to interest rate decisions from central banks in Britain, Norway and Switzerland later this week.

European shares saw sharp losses last week after France’s president called a snap election, with its high debt levels a source of concern for market participants.

The European Commission said France and six other countries should be disciplined for running budget deficits in excess of European Union limits, with deadlines for reducing the gaps to be set in November.

Latest polls suggest Marine Le Pen’s far-right National Rally party is leading ahead of the first round of the French parliamentary election.

The French benchmark CAC 40 closed nearly 0.8% lower.

Travel and leisure stocks added 0.6% to the pan-European index, boosted by a 1.4% rise in Accor after Barclays upgraded the hotel group to “overweight” from “equal weight”.

SMA Solar Technology AG plunged 31% after the German solar power parts supplier cut its profit guidance, citing political uncertainty.

Belgian metal recycling group Umicore jumped 3.4% on a J.P. Morgan double upgrade.

Trading was light in the absence of U.S. participants as markets there were shut for a public holiday.

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