European stocks ended higher on Wednesday, buoyed by unexpectedly soft U.S. consumer price inflation data that alleviated concerns regarding future interest rates. Investors are now anticipating potential interest rate cuts from the Federal Reserve this year, with the central bank's monetary policy announcement forthcoming later in the day.
The pan-European Stoxx 600 increased by 1.08%. The U.K.'s FTSE 100 rose by 0.83%, Germany's DAX advanced by 1.42%, and France's CAC 40 gained 0.97%. Switzerland's SMI also saw an uptick of 0.78%.
Elsewhere in Europe, stocks in Austria, Belgium, Denmark, Finland, Greece, Iceland, Netherlands, Norway, Poland, Portugal, Spain, Sweden, and Turkey closed on a positive note.
In the UK market, Rentokil Initial surged nearly 14% following activist investor Trian Fund Management's acquisition of a significant stake in the pest-control company. St. James’s Place rose by nearly 5%. Shares of Howden Joinery, Persimmon, 3i Group, RightMove, ICG, Diploma, Halma, Kingfisher, RS Group, Lloyds Banking Group, Ashtead, Standard Chartered, Taylor Wimpey, Experian, Barratt Developments, Schroders, Informa, and Unite Group increased by 2.4% to 4.2%.
Landore Resources surged 32% after successfully raising £3.683 million through a subscription of new shares. Conversely, Legal & General dropped about 5.5% as its new chief executive detailed plans to restructure the business into three core units. B&M European Value Retail fell by 2.4%, while Vodafone Group, Smurfit Kappa Group, BP, Ocado Group, and GSK recorded losses between 0.6% and 1.6%.
In Germany, HeidelbergCement saw a 4.4% rise. SAP, Siemens, Siemens Energy, Vonovia, Bayer, MTU Aero Engines, Fresenius Medical Care, Merck, Infineon, Zalando, Fresenius, and Adidas gained between 2% and 3.5%. However, Porsche, Sartorius, and Volkswagen declined by 1.4% to 1.8%, and Rheinmetall, BMW, Mercedes-Benz, and Commerzbank also ended in the red.
In France, Schneider Electric climbed approximately 4.75%, while STMicroelectronics advanced more than 3%. Legrand, Vinci, Saint-Gobain, Societe Generale, Eurofins Scientific, Air Liquide, Unibail-Rodamco, Publicis Groupe, BNP Paribas, Accor, Credit Agricole, Michelin, AXA, Vivendi, Essilor, and Hermes International saw gains between 1% and 2.5%. On the downside, Orange, Bouygues, and Engie declined sharply, and Thales, Kering, ArcelorMittal, and Sanofi also finished notably lower.
Turning to economic news, the UK economy was stagnant in April as growth in services output was offset by drops in both production and construction, according to the Office for National Statistics. The Gross Domestic Product (GDP) remained unchanged compared to the previous month, following a 0.4% expansion in March. Services output rose by 0.2%, marking its fourth consecutive month of growth, while industrial output decreased by a more-than-expected 0.9% month-on-month after a 0.2% rise in March. A slight 0.1% decline in output had been forecast.
Germany's consumer price inflation increased to 2.4% in May from April's consistent 2.2% growth, aligning with previously published flash data. In May, service costs drove inflation higher, while lower food and energy costs tempered overall price rises.
In the United States, the Labor Department reported that its Consumer Price Index (CPI) remained unchanged in May, following a 0.3% increase in April. Economists had anticipated a 0.1% rise. The unchanged reading resulted from a significant 3.5% drop in gasoline prices, which balanced out continued increases in shelter prices. Core consumer prices rose by 0.2% in May, following a 0.3% increase in April, with expectations set for another 0.3% rise.
The report also indicated that the annual rate of consumer price growth slowed to 3.3% in May from 3.4% in April, contrary to economists' expectations that growth would remain unchanged. Similarly, the annual rate of core consumer price growth decreased to 3.4% in May from 3.6% in April, anticipated to decline to 3.5%.