European stock markets rose on Friday, achieving their best weekly performance in two months, as slowing US inflation and rising expectations of a September rate cut by the Federal Reserve boosted investor sentiment.
The Stoxx Europe 600 index closed up 0.9% at its highest level since early June, mirroring gains in the US and boosting risk assets in anticipation of an interest rate cut by the US. Almost all sectors rose, with consumer stocks, technology companies and retailers leading the way.
Novo Nordisk, ASML Holding, Siemens and LVMH had the biggest positive impact on the index. The luxury goods industry in Europe bounced back on Friday after experiencing faster profit declines than the broader European market.
European stock markets are rebounding after being held back by uncertainties surrounding French and UK elections. Political turmoil in France in particular has weighed heavily on European stock markets. The Stoxx 600 index is up 9.4% year to date, about half the gain of the S&P 500 index over the same period. The French CAC 40 index has given up much of its gains, up just 2.4% year to date.
Arnaud Girod, head of economics and cross-asset strategy at Kepler Cheuvreux in Paris, said: "The situation in France is of course important, but these good indicators for the US are working in our favor because they will help to lower yields and digest some pressure."
Girod added that in terms of monetary easing, "this could also encourage the European Central Bank to take more measures".