U.S., European shares climb on hopes Fed will slow rate hike pace

European shares rose on expectations of more gradual interest rate increases, but Direct Line, an insurer, plunged after eliminating its full-year payout.

The global STOXX 600 (.STOXX) increased 0.4% as investors awaited Thursday’s U.S. inflation data for hints about the Federal Reserve’s interest rate strategy.

According to Craig Erlam, senior market analyst at OANDA, “investors remain in a bullish attitude going into tomorrow’s U.S. inflation report, boosted still by the December jobs report and the likelihood of the economy being less pinched by interest rates.”

Investors watched Thursday’s U.S. inflation statistics for clues regarding the Federal Reserve’s interest rate policy as the global STOXX 600 (.STOXX) rose 0.4%.

“Investors remain in a positive attitude going into tomorrow’s U.S. inflation report, bolstered still by the December jobs report and the prospect that the economy would be less pinched by interest rates,” says Craig Erlam, senior market analyst at OANDA.

Last week’s indications of a deceleration in wage inflation increased expectations of a more gradual tightening by the Fed and the European Central Bank.

The U.S. CPI data, which is scheduled to be released tomorrow, is expected to be slightly weaker than anticipated, according to trader Mark Taylor of Mirabaud Securities.

There is actually maybe a risk that a positive or inline CPI shock could lead to some profit-taking.

Rate-sensitive tech European shares (.SX8P) increased by 1.3% on Wednesday. Energy shares (.SXEP) increased by 0.9%, while miners (.SXPP) gained 0.1% as commodities prices increased due to optimism surrounding the reopening of China’s borders, the world’s largest customer.

Individual European shares fell to the bottom of the STOXX 600 index, with Direct Line Insurance Group Plc (DLGD.L) falling 23.5% after the British home and auto insurance abruptly canceled its final payout until 2022.

Rivals Aviva (AV.L) and Admiral (ADML.L) experienced declines of 6.8% and 2.1%, respectively.

The second-largest grocery chain in Britain, Sainsbury’s (SBRY.L), had a 1.6% decline as Chief Executive Simon Roberts expressed caution on the consumer environment.

Nevertheless, as mining and oil firms advanced, Britain’s commodity-heavy FTSE 100 (.FTSE) reached its highest level in more than four years.

After a source informed TradingTwist that activist investor Bluebell was pushing for a break-up of the German pharmaceutical business, Bayer (BAYGn.DE) increased by 3.6%. Bloomberg broke the news of Bluebell’s move late on Tuesday.

After Chairman and Chief Executive Bernard Arnault reinforced his family’s control over the luxury goods company by placing his daughter Delphine in charge of one of its top brands, Christian Dior, LVMH (LVMH.PA) increased by 2.1%.

The Jyske Bank (JYSK.CO), a Danish institution, reached a record high after raising its full-year projection. Peer institutions Sydbank (SYDB.CO) and Danske Bank (DANSKE.CO) also added 1.0% and 0.9%, respectively.

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