<h2>STOXX 600 Marks Best Week since March End</h2> European shares concluded the week on a positive note, recording their most significant weekly gain in over three months. Investors held onto hopes that diminishing inflation would lead the U.S. Federal Reserve to halt rate hikes in the near future.<h2> </h2><h2>Oil and Gas Stocks Decline, STOXX 600 Closes Marginally Lower</h2> Despite minor losses on Friday, the pan-European STOXX 600 index (.STOXX) maintained its upward momentum. It closed 0.1% lower as falling crude prices resulted in a 2.1% drop in oil and gas stocks (.SXEP). <h2>Positive Performance for the Week, Recouping Previous Losses</h2> The STOXX 600 index gained nearly 3% throughout the week, achieving its most impressive performance since the end of March. This upswing allowed the index to recover almost all of the losses incurred the previous week. <h2>Inflation Concerns and Central Banker Statements</h2> Elwin de Groot, the Head of Macro Strategy at Rabobank, emphasized the cautious stance of central bankers regarding inflation. Despite acknowledging progress, they maintain a focus on potential risks. <h2>Speculation on U.S. Inflation Readings</h2> Reports on U.S. inflation readings sparked speculation that the economy could be entering a disinflation phase. As a result, the Federal Reserve may soon consider pausing its rate tightening strategy after implementing a 25 basis points rate hike in July. <h2>Euro Zone Government Bonds and Rate Hike Bets</h2> Traders responded to the situation by reducing their rate hike expectations from the European Central Bank, leading to a decline in Euro zone government bond yields. <h2>Performance of the Technology Sector Index</h2> The rate-sensitive technology sector index (.SX8P) recorded a 6% increase throughout the week, marking its most outstanding performance since January. Additionally, the index closed at its highest level since late January 2022. <h2>Miners Remain Strong, Telecom Firms Experience Decline</h2> While miners (.SXPP) encountered a 1.0% decline on the day, they maintained their position as the second-best performing sector of the week, with a 5.7% gain. The drop in the dollar provided a boost to metal prices.On the other hand, telecom firms (.SXKP) experienced a 1.3% decline, largely due to Nokia's (NOKIA.HE) downfall of more than 9% after revising its full-year results outlook. <h2>Ericsson Reports Disappointing Second-Quarter Results</h2> Ericsson (ERICb.ST), a Swedish telecommunications company, faced a significant setback as it reported a 62% slump in second-quarter adjusted operating profit. The news caused a 10.6% drop in the company's stock. <h2>Key Performances and Company Earnings</h2> JPMorgan (JPM.N), Wells Fargo (WFC.N), Citi (C.N), and BlackRock (BLK.N) started the U.S. reporting season with better-than-expected results, diverting attention to euro zone company earnings. <h2>Partners Group Reports Above-Expectation Growth</h2> Swiss private investment firm Partners Group (PGHN.S) enjoyed a 12.0% surge after reporting higher-than-expected growth in assets under management during the first half of the year. <h2>Axfood Demonstrates Resilience in the Face of Declining Inflation</h2> Despite a decline in inflation, Swedish food retailer Axfood (AXFO.ST) achieved an 8.1% increase in retail sales growth during the second quarter. In Summary, European shares concluded the week on a positive note, experiencing their most substantial gain in over three months. Optimism surrounding diminishing inflation in the United States fueled hopes of a pause in rate hikes by the U.S. Federal Reserve. As investors closely monitor economic indicators, they remain cautious of potential risks.

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Stay informed with the latest European market update as shares rally, resulting in the best week in over three months, fueled by hopes of disinflation in the United States.

European Shares Close Best Week in Over Three Months on US Disinflation Hopes

European Stocks Surge: Best Week in Over Three Months Amid US Disinflation Hopes

<h2>Key Highlight</h2> <ol><li>The dollar is recovering from its largest daily decline since February.</li><li>The euro, yen, yuan, Aussie, and kiwi reach new highs in Asia.</li><li>The dollar index is below 100.5, marking its lowest level since April 2022.</li></ol> In recent trading sessions, the US dollar has experienced a significant decline, marking its worst daily drop since February. Traders in Asia have perceived the sluggish US inflation as an indication that the era of US interest rate hikes is drawing to a close. Consequently, the dollar's value has plummeted, reaching its lowest point since April 2022. This article explores the impact of these developments on various currencies, including the euro, yen, yuan, Aussie, and kiwi. <h2>Dollar Weakens Across Major Currencies</h2> The dollar's weakness persisted in Asia, with the euro, yen, yuan, Aussie, and kiwi all reaching new highs. The euro, in particular, surged to $1.1141, a level not seen in the past 15 months. The yen also demonstrated strength, climbing 0.3% to 138.16 against the dollar, its highest since mid-May. Concurrently, the US dollar index experienced a slight decline, falling to 100.47, its lowest since April 2022. Furthermore, the New Zealand dollar rose to a two-month high of $0.6309, while the Australian dollar reached a three-week peak of $0.6796. <h2>Traders Display Confidence in Dollar's Downward Trajectory</h2> Although the shifts in currency values were modest, they indicate that traders believe the dollar still has room to decline further. Offshore trade saw the yuan reach a one-month high against the dollar, and both sterling and the Swiss franc approached their overnight highs. This growing sentiment among market participants suggests a shift in comfort levels when it comes to shorting the dollar, particularly as the terminal Federal Reserve policy rate appears to have reached its peak. <h2>Inflation Data and Implications</h2> US core inflation figures for June showed a 0.2% increase, falling short of the market's expectation of 0.3%. Additionally, headline annual CPI decreased to 3%, a notable drop from the peak of 9.6% observed a year ago. Steve Englander, head of global G10 currency research at Standard Chartered, described the recent inflation data as "very benign" and emphasized the diminishing impact of excessive CPI gains. He also expressed doubt about the likelihood of another rate hike by the Federal Reserve following the meeting scheduled for July 26. <h2>Market Expectations and Rate Speculation</h2> Interest rate futures indicate that a Federal Reserve rate hike later this month has already been fully priced in. However, expectations for further increases are being adjusted downward. This adjustment is evident in the drop of over 15 basis points in two-year Treasury yields, which are closely tied to rate expectations. Consequently, the yields now stand at 4.73%. Meanwhile, in Scandinavia, where inflation is proving to be persistent and central bankers are projecting additional rate hikes, currencies such as the Swedish and Norwegian crowns have surged, with gains of over 2% and an anticipated increase of approximately 5% for the week. <h2>The Yen's Strength and Market Focus</h2> Over the past five trading days, the yen has appreciated by 4.8% against the dollar, and similar gains have been observed against other major currencies. This notable shift in the market can be attributed to the clearing out of short-sellers, prompting investors to turn their attention to whether the Bank of Japan (BOJ) will adjust its yield control policy in the near future. Japanese government bond yields reached multi-month highs on Wednesday, although the closely monitored 10-year yield remains below the BOJ's 0.5% cap at 0.46%, indicating limited speculation regarding a policy shift. <h2>Sterling and Swiss Franc Performance</h2> Sterling currently sits at $1.2994, slightly below its overnight high of $1.3001. The Swiss franc, which reached its highest point since 2015 overnight, is trading just below that level at 0.8661 francs to the dollar. The movements of these currencies further demonstrate the prevailing weakness of the US dollar and the favorable conditions for alternative currencies. <h2>Upcoming Economic Data</h2> Later on Thursday, the release of Chinese trade data, European Central Bank meeting minutes from the previous month, European industrial production figures, and British monthly GDP will provide further insights into global economic conditions. <h2>Footnote</h2> The recent decline of the US dollar against major currencies suggests that traders anticipate a peak in US interest rates. Sluggish US inflation figures and diminishing expectations of further rate hikes have weakened the dollar. Meanwhile, other currencies, such as the euro, yen, yuan, Aussie, and kiwi, have experienced upward momentum, demonstrating traders' confidence in the dollar's continued decline. As economic data continues to shape market sentiment, it remains to be seen how these trends will develop in the near future.

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Explore the impact of traders' anticipation of US interest rates reaching their peak, leading to substantial losses for the dollar.

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European Stocks Surge: Best Week in Over Three Months Amid U...

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