European Stocks Edge Lower as Traders Weigh Policy Signals

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(Bloomberg) — European stocks closed well off session lows on Wednesday after policymakers gathered at the European Central Bank’s annual forum signaled they will not rush to raise interest rates. 

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The Stoxx Europe 600 Index was down 0.4% at close after wrapping up its best three-month gain since late 2020. While autos and media stocks were the top performers, utilities, technology and energy names were the biggest laggards, with the latter hurt by crude oil’s drop toward $71 a barrel.

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The index had earlier shed as much as 0.7% but recovered some losses after Federal Reserve Chairman Kevin Warsh said at the forum in Sintra, Portugal, that price risks have come down in recent weeks. Warsh also emphasized the Fed’s autonomy in determining the proper policy course, and repeated his determination to bring inflation back to the US central bank’s 2% target. 

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ECB Governing Council member Martin Kocher, meanwhile, said the next policy decisions will come down to either hiking interest rates further or holding them steady. 

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Earlier, data showed euro-area inflation eased more than anticipated. 

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The report “removes some urgency for the ECB to keep tightening immediately,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “The constructive interpretation is that Europe is getting both earnings support and less rate pressure, in a lower valuation environment.”

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On the earnings front, profit expectations are on the rise, with full-year revisions implying profit growth of 14% in the Stoxx 600 this year, according to Deutsche Bank AG strategists.

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Among individual names, Galderma Group tumbled 2.7% after one of its treatments was turned down by the US Food and Drug Administration. Rheinmetall AG shares gained 6.1% along with the broader European defense sector after Tuesday’s long-awaited UK defense investment plan committed an additional £15 billion to overhaul the British military.

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—With assistance from Ruhell Amin.

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