European stocks hit a three-month high on Thursday after a better-than-expected report on German business confidence boosted investors’ hopes of a more moderate slowdown in the region’s largest economy.
The Stoxx Europe 600 regional index added 0.5 percent, continuing a run that saw the benchmark index rise more than 9 percent in the past month. The FTSE 100 index in London ended up flat. US markets were closed for the Thanksgiving holiday.
Germany’s DAX added 0.8 percent after the latest Ifo institute index showed confidence among 9,000 companies rose to 86.3 in November from 84.5 in October, ahead of a Reuters poll predicting a reading of 85.Read:UK business leaders speak out on fallout from mini-Budget
“Markets are now widening with a delayed recession in Germany, just as the data points to a more optimistic scenario,” said Agnes Baelisch, chief European strategist at Barings Investment Institute.
“This makes the ECB’s work much more sensitive,” Baelish added. “It should continue to tighten financing conditions to guide inflation expectations and wage adjustments downward, just as the economy shows some signs of an emerging recovery from a hard shock.”
Traders shrugged off the news that the spread between the yield on 2-year and 10-year German government debt has reached its widest level since 1993.
Long-term debt usually yields more than short-term debt to compensate investors for the risk that inflation will eat away at their returns. The so-called inversion of the yield curve, when the opposite is true, usually precedes recessions.Read:Mango Market’s DAO forum set to approve $47M settlement with hacker
Germany’s yield curve inverted for the first time in 29 years in early November, though the spread between yielders narrowed slightly on Thursday. The two-year yield decreased 0.03 percentage points to 2.11 percent, and the 10-year yield decreased 0.07 percentage points to 1.85 percent. Yields decrease as prices rise.
Stock investors also boosted overnight gains on Wall Street, minutes after the Fed’s November meeting revealed that officials believed their policy of aggressively tightening interest rates was starting to pay off in the fight against inflation.Read:The horrifying truth behind the coming collapse of basketcase Britain
The minutes showed that “financial conditions were significantly tightened in response to the committee’s policy measures, and their effects were evident in the most interest rate-sensitive sectors of the economy.”
The central bank raised interest rates by 0.75 percent four times in a row. Stephen Blitz, chief US economist at TS Lombard, who nonetheless predicted a 0.75% rate, said the Fed was “ready, ready, and concerned to slow the pace of the rally because they still believe they can slow inflation without creating a recession and increasing unemployment.” High point in December. He added that the Fed “will regret it today if it doesn’t.”
In Asia, Hong Kong’s Hang Seng rose 0.8 percent, and Japan’s Topix added 1.2 percent.