STOXX 600 ends 2023 up 12.6% on rate cut optimism, Italy best performer

As Bourses across Europe will be closed on January 1 on account of the New Year holiday, European shares ended 2023 with an annual gain of almost 13 per cent on hopes of softer monetary policy from major central banks next year. The pan-European STOXX 600 edged up 0.1 per cent on Friday, posting its seventh straight weekly gain and its best December performance since 2021. It closed the year 12.6 per cent higher, with rate-sensitive technology stocks among the best-performers.

Global markets have rallied in the last two months as bond yields retreated on hopes of central bank rate cuts in early 2024. Still, the European Central Bank (ECB) has yet to indicate any potential easing ahead although money markets indicate an 80 per cent chance of a first cut in March. The European share benchmark has recovered more than 12 per cent from lows in March when global markets were rattled by the swift collapse of Swiss lender Credit Suisse and U.S. mid-sized lender Silicon Valley Bank. Italian shares outpaced their regional peers this year, with an almost 30 per cent rise, while Swiss and British indexes were the laggards. On Friday, media stocks led gainers, with a rise of 0.5%, followed by banks. Spanish stocks inched up 0.2 per cent after a preliminary reading showed the 12-month inflation rate fell to 3.1% in December, from 3.2 per cent the previous month. Shares in Spanish pharma group Grifols jumped 8.6% after it agreed to sell a 20 per cent stake in China's Shanghai RAAS Blood Products for about $1.8 billion to Chinese home appliance company Haier Group Corporation. 

Separately, mortgage lender Nationwide said British house prices fell by 1.8 per cent in the 12 months to December. "Unchanged house prices in December ensured that over the course of 2023 they fell by much less than forecasters had expected," Andrew Wishart, senior property economist at Capital Economics, said. “With mortgage rates falling, it is increasingly likely that house prices avoid falls altogether next year.” The UK's FTSE 100 also edged up 0.1 per cent on Friday, ending the year 3.8 per cent higher but lagging most of its European peers. 

(With Reuters inputs)