European shares start 2023 on upbeat note on encouraging factory data

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markets, click or type LIVE/ in a news window)

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Euro zone factories’ darkest days likely over, Dec PMIs
show

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ECB must stop wage growth from fuelling inflation -Lagarde

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Germany’s finance minister sees 2023 inflation at 7%

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Croatia joins euro, Schengen area

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STOXX 600 up 0.8%

Jan 2 (Reuters) – European shares rose in the first
trading session of 2023 on Monday as euro zone manufacturing
data suggested the worst had passed after a year marred by fears
of a recession as central banks hiked rates globally.

The pan-regional STOXX 600 rose 0.8%, supported by
consumer discretionary stocks. The automobiles and parts sector
gained 2.5% and luxury names like LVMH and
Kering added about 1.5% each.

“With 10-year bund yields above 2.50%, relaxed year-end
trading and the probable drop in HICP inflation are raising
hopes for an upbeat start into the year,” Commerzbank Research
analysts said in a note, referring to the euro zone consumer
prices inflation data due later this week.

An early indicator was data showing the downturn in euro
zone manufacturing activity has likely passed its trough as
supply chains begin to recover and inflationary pressures ease,
leading to a rebound in optimism among factory managers.

The STOXX 600 ended 2022 with sharp losses, driven by
central banks’ aggressive policy tightening to rein in soaring
prices, an economic slowdown, the Russia-Ukraine conflict that
fanned inflationary pressures and growing concerns over COVID
cases in China.

Rate-sensitive technology stocks, among the
worst-performing shares last year, rose 1.5% on the day, despite
more hawkish signals from the European Central Bank.

ECB President Christine Lagarde said euro zone wages are
growing quicker than earlier thought and the central bank must
prevent this from adding to already high inflation.

Bond yields of Europe’s largest economy, Germany, dropped
from their highest levels in more than a decade as investors
braced for inflation data this week.

Germany’s finance minister expects inflation in Europe’s
biggest economy to drop to 7% this year and to continue falling
in 2024 and beyond, but expects high energy prices to be the new
normal.

The German DAX gained 1.0%, while other European
exchanges also started the year on a positive note. The London
and Dublin stock exchanges are closed for the New Year’s day
holiday.

The energy sector added 1.3%, tracking firm crude
prices.

Croatia rang in the new year with two historic changes, as
the European Union’s youngest member joined both the EU’s
border-free Schengen zone and the euro common currency.
(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by
Vinay Dwivedi and Savio D’Souza)

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