European stocks moved higher on Thursday as investors welcomed a U.S. inflation report that came in line with expectations and reduced concerns about another near-term Federal Reserve rate hike.
The Stoxx Europe 600 Index gained 0.2%, moving back toward record highs. Germany’s DAX and France’s CAC 40 each advanced 0.3%, while the FTSE 100 rose 0.6% after stronger-than-feared UK economic data boosted sentiment.
U.S. CPI Reduces Fed Rate Hike Concerns
Wednesday’s U.S. Consumer Price Index report showed that headline inflation increased 0.1% month-on-month in July, while core inflation held at 2.5% year-on-year.
The figures matched market expectations and helped ease concerns that the Federal Reserve may need to tighten monetary policy again in the near term.
The inflation report followed a surprisingly weak U.S. nonfarm payrolls reading from the previous week, strengthening expectations that the Fed could leave interest rates unchanged at its September meeting.
Money markets responded quickly. Traders priced in around a 40% probability of a 25-basis-point rate hike at the Fed’s September 16 meeting, down from nearly 67% one week earlier.
Lower expectations for further monetary tightening helped improve risk appetite across global equity markets.
Markets See More Breathing Room for the Fed
Sam Hill, head of market insights at Lloyd’s Bank, said the July CPI report contained few surprises and reinforced signs that inflation may be slowing.
The latest figures could give the Federal Reserve more room to wait before taking further action, especially as weaker labor-market data adds uncertainty to the economic outlook.
While inflation risks remain, markets currently see limited evidence strong enough to justify another immediate rate increase.
UK GDP Growth Supports FTSE 100
The UK economy also delivered a positive signal on Thursday.
British GDP expanded 0.4% in the second quarter, matching economists’ expectations and indicating that the economy continues to grow despite elevated borrowing costs.
The expansion was supported by resilience across consumer-facing service industries.
For the Bank of England, the GDP figures suggest that the economy remains relatively stable, allowing policymakers to maintain a cautious and data-dependent approach to future interest-rate decisions.
The growth figures also provided support for UK-listed industrial companies and domestic financial stocks.
Oil Prices Ease but Remain Above $80
Energy markets remained an important focus for investors.
Crude oil prices pulled back from recent multi-week highs on Thursday but stayed above $80 a barrel.
Traders continued to monitor tensions between the United States and Iran over shipping access through the Strait of Hormuz.
Despite ongoing diplomatic efforts, Washington and Tehran remain divided over the terms of a lasting agreement. As a result, geopolitical risk continues to support elevated energy and shipping costs.
European Economic Data Comes Into Focus
Investors are now awaiting additional economic releases from Europe.
Spain’s final July inflation figures and the Eurozone’s industrial production report are due later in the session.
The data could provide fresh insight into regional inflation trends and manufacturing activity, both of which remain important for the European Central Bank’s policy outlook heading into the autumn.
Pandora Gains While Thyssenkrupp Falls
Among individual stocks, Pandora shares climbed nearly 3% after the company beat second-quarter expectations and raised its earnings outlook.
Meanwhile, Thyssenkrupp fell around 1.5%, despite improving the lower end of its 2026 outlook.
Overall, European equities benefited from easing Fed rate hike fears, steady UK growth and a more supportive global risk environment.
