European equities rise as UBS boosts financial services stocks

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European equities opened with small gains on Thursday ahead of key eurozone inflation data, as strong results from UBS lifted the region’s financial services stocks.

The region-wide Stoxx Europe 600 rose 0.2 per cent in morning trade while Germany’s Dax advanced 0.2 per cent. London’s FTSE 100 opened up 0.1 per cent.

Financial stocks were boosted by news that UBS would absorb Credit Suisse’s domestic bank, supporting the country’s banking sector. Its shares rose 5 per cent, while the Stoxx 600 Europe Financial Services index rose 1.3 per cent.

Traders were also looking ahead to the eurozone-wide inflation figure coming out later in the day, which is expected to show that the annual rate of price growth declined to 5.1 per cent in August, down from 5.3 per cent in the previous month. 

French preliminary inflation data on Thursday came in ahead of analysts’ expectations, sowing further doubt over whether the European Central Bank would increase interest rates at its next policy meeting.

Nonetheless, markets on Thursday were pricing in a 60 per cent chance that the European Central Bank would keep interest rates steady in September, according to data compiled by Refinitiv and based on interest rate derivatives prices. 

In government debt markets, the yields on policy-sensitive two-year German Bunds fell 0.03 percentage points to 3.03 per cent, while yields on the 10-year Bunds, a regional benchmark in Europe, declined 0.02 percentage points to 2.51 per cent. Bond yields rise as prices fall. 

Meanwhile, futures contracts tracking Wall Street’s benchmark S&P 500 added 0.1 per cent and those tracking the tech-focused Nasdaq 100 declined by the same amount ahead of the New York open. 

Both indices advanced in the previous session, as weak US growth and labour market data bolstered investors’ bets that the Federal Reserve would hold back from further interest rate increases this year. 

“US data wasn’t very remarkable but it was all dovish”, said Mike Zigmont, head of research and trading at Harvest Volatility. “The case for the Fed to hike again is receding.”

Traders were awaiting the release of personal consumption expenditures data — the Fed’s preferred measure of inflation — on Thursday, as well as the closely watched non-farm payrolls data on Friday.

Chinese stocks were led lower by a weak property sector on Thursday, after Country Garden, once the country’s largest developer by sales, reported record losses. China’s CSI 300 fell 0.6 per cent, while Hong Kong’s Hang Seng declined 0.9 per cent. 

The CSI 300 Real Estate index, which tracks property stocks listed on mainland exchanges, declined 5.3 per cent. Hong Kong’s Hang Seng Mainland Properties index lost 2.3 per cent, erasing early gains.

The country’s equity markets were also hit by weak data on factory activity, with the official manufacturing purchasing managers’ index coming in at 49.7 for the month, below the neutral 50 mark that indicates a contraction.