European Shares Surge Amidst Inflation Relief and Defense Stock Rebound

European shares reached a near two-week high with a recovery in technology and defense stocks as U.S. inflation data bolstered expectations of Federal Reserve interest rate cuts. Investors are optimistic despite concerns over excess enthusiasm in market interpretations. German inflation eased, easing price pressures in Europe.

On Wednesday, European shares climbed to their highest in nearly two weeks, driven by recovery in technology and defense stocks. Tame U.S. inflation data has bolstered expectations for Federal Reserve interest rate cuts next month, leading to a 0.5% rise in the pan-European STOXX 600 index.

U.S. stock markets reached record highs on Tuesday with the mild inflation increase in July alleviating concerns over tariff-induced price hikes. Traders are anticipating a 96% likelihood of a September rate cut, according to the CME Group's FedWatch tool.

In Europe, German inflation eased, marked by a reduction to 1.8% in July. Defense stocks surged amid expectations of the Russo-Ukraine war ending with Donald Trump's upcoming summit with Vladimir Putin. Rheinmetall and Renk added significant gains, reflecting increased defense spending.

(With inputs from agencies.)