European shares close at record high levels on economic data

The index closed up 0.6%, a day after surpassing the 600‑point level for the first time

European shares scored another record close on Tuesday, after benchmarks in Germany and Spain climbed to all-time highs, as positive economic data distracted investors from heightened international tensions.

The pan-European STOXX 600 ended last year with its strongest advance since 2021, fuelled by easing interest rates and increased defence spending. While analysts expect this year’s returns to be more measured, they also expect the market to keep growing.

On Tuesday, Goldman Sachs lifted its 12‑month target for the STOXX 600. The index closed up 0.6%, a day after surpassing the 600‑point level for the first time.

We’re becoming a bit inured to the environment of heightened uncertainty, said Matthew Sherwood, senior global economist at the Economist Intelligence Unit. There’s still guarded optimism. And there are things afoot that are supportive of growth.

Among regional bourses, Germany’s DAX index and Spain’s IBEX edged up after hitting record highs in early trading, while the benchmark index in Italy slipped 0.2%, paring gains after a new peak.

Inflation cooled more than economists expected across several of the euro zone’s biggest economies last month, even as growth held steady, reinforcing the view that price pressures have faded and the bloc is surprisingly resilient.

In Germany, the region’s largest economy, inflation eased to 2.0% from 2.6%, undershooting forecasts of 2.2%. In France, inflation dipped to 0.7% from 0.8%, while Spain’s rate edged down to 3.0% from 3.2%.

Policymakers have signalled that there was no appetite to lower interest rates any further.

We’ll see perhaps a more dovish view from the ECB that gives it a bit more room to even not necessarily cut, but certainly talk about being more accommodative in the short term, said IG chief markets strategist, Chris Beauchamp.