European shares kick off last week of 2023 higher

By Shashwat Chauhan and Bansari Mayur Kamdar

(Reuters) -European shares edged higher on Wednesday in a holiday-shortened week on growing optimism around U.S. interest rate cuts as early as March, while shipping companies fell on news of resumption of travel via the Suez Canal and the Red Sea.

The pan-European closed 0.3% higher.

The rate-sensitive technology sector , which houses Europe’s major chipmakers, rose 0.7%, while real estate stocks climbed 0.8%.

Limiting gains, Denmark’s Maersk (CO:) fell 4.7% on scheduling dozens of vessels to travel via Suez Canal in the coming days, a further sign that global shipping firms are returning to Red Sea routes after stopping earlier this month following attacks by Yemen’s Houthi group.

Other shipping companies like Hapag Lloyd, Frontline (NYSE:), Hoegh Autoliners, Wallenius Wilhelmsen and Hafnia shed between 1.3% and 8.2%.

Volumes are expected to be light as traders return from an extended Christmas break, and with only a few trading days left in 2023.

The STOXX 600’s seven-week winning streak has helped push the benchmark up nearly 13% so far this year, with retail and technology among the best-performing sectors.

Global markets have rallied since mid-December when the Federal Reserve hinted at rate cuts next year. However, the European Central Bank (ECB) did not share a similar outlook.

“Pricing for the first ECB cut in March or April 2024 has been relatively consistent, but the gap versus the Fed is no longer considered wide,” said Geoff Yu, EMEA macro strategist at BNY Mellon (NYSE:).

“There is also very little difference between ECB and Fed policymakers’ pushback against current pricing, though considering the labour market situation on the ground, we believe the Fed’s warnings are more credible.”

Among individual stocks, Bayer (OTC:) rose 2.3% after the German drugs-to-pesticides group said it won a lawsuit by a California man who said he developed cancer from exposure to its Roundup weedkiller.

Vestas Wind Systems jumped 4.5% after the Danish wind turbine-maker announced a number of new orders.

UK’s Anglo American (JO:) advanced 2.3% after a report stated the miner is gearing up to sell a minority stake in Woodsmith, Britain’s biggest mining project.