European shares rise on optimism around U.S. rate cuts

The rate-sensitive technology sector, which houses Europe's major chipmakers, gained 0.7%, while real estate stocks jumped 0.8%

European shares rose on Wednesday in a holiday-shortened week on growing optimism around U.S. interest rate cuts as early as March, while shipping companies dropped on news of resumption of travel via the Suez Canal and the Red Sea.

The pan-European STOXX 600 ended 0.3% higher.

The rate-sensitive technology sector, which houses Europe's major chipmakers, gained 0.7%, while real estate stocks jumped 0.8%.

Limiting gains, Denmark's Maersk dropped 4.7% on scheduling dozens of vessels to travel via Suez Canal in the coming days, a further sign that global shipping companies are returning to Red Sea routes after stopping earlier this month following attacks in the region.

Other shipping firms such as Hapag Lloyd, Frontline, Hoegh Autoliners, Wallenius Wilhelmsen and Hafnia lost between 1.3% and 8.2%.

Volumes are expected to be light as traders return from an extended Christmas break, and with only a few trading days left in 2023.

The STOXX 600's seven-week winning streak has helped push the benchmark nearly 13% so far this year, with retail and technology among the best-performing sectors.

Global markets have rallied since mid-December when the Fed hinted at rate cuts next year. However, the ECB did not share a similar outlook.

Pricing for the first ECB cut in March or April 2024 has been relatively consistent, but the gap versus the Federal Reserve is no longer considered wide, said Geoff Yu, EMEA macro strategist at BNY Mellon.

He added: There is also very little difference between ECB and Fed policymakers' pushback against current pricing, though considering the labour market situation on the ground, we believe the Fed's warnings are more credible.