European Stocks Rise as Inflation Eases in May, Despite Disappointing Recent Data from Spain, France and Germany

European stocks rose at the close of trading today, Thursday, as data on falling inflation sparked controversy over the need for further interest rate hikes beyond this month, and hopes that the United States will avoid defaulting on its debt boosted investor sentiment.

The pan-European Stoxx 600 index closed up 0.8% after closing in the previous session at its lowest level in two months.

The commodity, media and energy sectors posted the biggest gains. ‏

Headline and core inflation in the eurozone eased in May by far less than expected, following recent weaker-than-expected inflation data from Spain, France and Germany that spurred hopes that interest rates will peak in September rather than December. As previously predicted…

“The inflation data is heading in the right direction, lowering expectations that the European Central Bank will raise interest rates more sharply,” said Giles Coghlan, senior market analyst at HYCM.

François Villeroy de Gallo, Governor of the Bank of France, a member of the European Central Bank, indicated that raising interest rates began to affect inflation and that the next hike would be marginal, while European Central Bank President Christine Lagarde continued to stress the need to further tighten monetary policy. ‏

Some US Federal Reserve officials pointed out that they did not raise interest rates in June, which contradicted market expectations for another hike.

Meanwhile, the US House of Representatives on Wednesday passed a bill to suspend the $31.4 trillion government debt ceiling and avert a catastrophic default, boosting optimism that the Senate will pass it before the weekend.

Among individual stocks, Heidelberg Materials rose 2% after JP Morgan upgraded the cement maker’s share rating.

Also read: The debt ceiling crisis.. What scenario awaits the US economy and the world?