European stocks hit record highs on optimism of interest rate cuts after low inflation

(MENAFN) European stocks surged to all-time highs on Friday, capping off a volatile month with a positive outcome after a significant drop in eurozone inflation fueled market speculation of an upcoming interest rate cut. The pan-European STOXX 600 index edged up by 0.1 percent, closing above 525 points for the first time, having reached an intraday peak of 526.66 points—its highest level ever recorded. This modest gain contributed to a 1.2 percent advance for the index in August, marking its second consecutive month of growth. The rally was largely driven by fresh data from Eurostat, the European Union's statistical agency, which revealed that inflation across the 20-nation eurozone had slowed to 2.2 percent in August. This represents the slowest inflation rate since July 2021 and brings it closer to the European Central Bank's (ECB) target of 2 percent.

The sharp decline in inflation has reinforced expectations that the ECB might reduce borrowing costs during its September meeting, a move that could provide further stimulus to the market. Adding to the positive market sentiment, recent data from the United States indicated a similar slowing trend in inflation, which has strengthened the outlook for the Federal Reserve to potentially lower interest rates next month. The anticipation of rate cuts on both sides of the Atlantic bolstered investor confidence and led to gains in various sectors. Notably, the real estate sector, which is highly sensitive to interest rate changes, emerged as the best performer, climbing by 1.4 percent. The banking sector also posted gains, rising by 0.8 percent, as investors looked forward to a more favorable lending environment in the near future. 

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