European shares extended their record-breaking rally on Thursday as weaker U.S. employment data reduced expectations of an immediate Federal Reserve interest rate increase.
The pan-European STOXX 600 gained 0.2% by 11:00 GMT. The index remained near an all-time high after closing at a record level on Wednesday.
Weak U.S. Jobs Data Lifts European Shares
Global market sentiment improved after U.S. job creation slowed more sharply than expected.
The weaker payroll figures offered relief to European stocks. Investors had previously been concerned that prolonged monetary tightening in both the United States and Europe could weaken economic growth.
A less aggressive Federal Reserve could reduce upward pressure on global borrowing costs. It may also limit capital flows from the eurozone into higher-yielding U.S. assets.
This would give the European Central Bank more flexibility when managing its own interest rate policy.
Fed Rate Hike Expectations Decline
Before the U.S. employment report, markets were pricing in a probability of more than 60% that the Federal Reserve would raise rates in September, according to the CME FedWatch tool.
Expectations of another increase had grown following hawkish comments from newly appointed Fed Chair Kevin Warsh.
However, traders reduced those bets after the jobs figures were published. Markets began shifting towards the possibility that the Fed could leave rates unchanged until at least October.
ECB Comments Support European Markets
European shares also received support from the European Central Bank’s annual policy forum in Sintra, Portugal.
ECB President Christine Lagarde said the risks surrounding eurozone inflation and economic growth had become more broadly balanced.
Her comments provided some relief following the ECB’s 25-basis-point interest rate increase in the previous month.
The remarks suggested that the central bank may have more room to adjust its monetary policy without having to follow an aggressive series of Federal Reserve rate hikes.
STOXX 600 Heads for Strong Weekly Gain
The STOXX 600 was on course to record its strongest weekly performance in almost two months.
Investor confidence was also supported by progress in peace negotiations between the United States and Iran.
The diplomatic breakthrough helped push oil prices back towards pre-war levels. Global shipping activity also began to normalise.
Lower energy costs and improved shipping conditions could reduce inflationary pressure on European companies and ease disruption across regional supply chains.
DAX Reaches Another Record High
Most major European stock indices followed the wider market higher.
Germany’s DAX climbed 0.6% to a fresh record high. Italy’s FTSE MIB gained 0.5%, while France’s CAC 40 remained broadly unchanged.
In the United Kingdom, the commodity-focused FTSE 100 declined 0.3%.
Pirelli and Auto1 Group Shares Rise
Among individual stocks, Pirelli gained around 2% following reports that Czech businesses were interested in acquiring a stake in the tyre manufacturer.
Auto1 Group also rose approximately 2% after JPMorgan placed the company on its positive catalyst watch list.
Overall, cooling U.S. employment data, more balanced ECB commentary and geopolitical progress helped European shares remain near record levels.
