European Shares Surge on Optimistic Earnings and Inflation Hopes

European shares rose on Friday, achieving a second week of gains driven by strong earnings. U.S. inflation data suggesting a possible Federal Reserve rate cut further buoyed markets. France's CAC 40 led the gains while significant moves included Addtech and Ericsson climbing, overshadowing setbacks for EMS Chemie and Axfood.

European shares advanced on Friday and positioned themselves for a second consecutive week of gains, buoyed by positive earnings updates. U.S. inflation data also contributed to market optimism, fostering hopes of a potential September interest rate cut by the Federal Reserve.

The pan-European STOXX 600 index rose by 0.3%, marking its highest point since June 13, with a notable 1.1% increase in the telecom sector. France's CAC 40 led the charge, rising 0.7% following a week of volatile elections where the left-wing New Popular Front continued discussions on potential prime minister candidates.

Economic indicators showed consumer prices in France increased by 2.5% year-on-year in June, confirming earlier readings. Meanwhile, German wholesale prices fell by 0.6%. In the U.S., consumer prices dropped unexpectedly, marking the smallest annual increase in a year, which strengthened expectations of a future Fed rate cut.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, remarked, "I don't know for the Fed but investors definitely got the evidence that inflation is on the right path to justify a Fed rate cut sooner rather than later." Focus now shifts to producer prices data for further affirmation of easing inflation in June.

Among individual stocks, Sweden's Addtech soared to a record high, climbing 12.3% following a positive outlook. Ericsson gained 8.2% after reporting a smaller-than-expected drop in Q2 sales. Conversely, EMS Chemie fell by 6.4% after adjusting 2024 sales guidance, and Axfood plummeted 7.9% due to operational disruptions affecting quarterly earnings.

Norwegian Air surged 6.1% post an earnings beat despite lower demand and ticket prices, helped by improved cost levels and cash flow. Aker BP rose 2.1% despite reporting lower-than-expected Q2 profit and reducing its full-year output outlook, thanks to ownership by BP.

In the U.S., the earnings season looks to kick off with major banks like JPMorgan Chase, Wells Fargo, and Citigroup reporting before the opening bell.

(With inputs from agencies.)