Europe close: Stocks rise, but risk appetite wanes ahead of US NFP data

European stocks inched higher on Thursday as investors refrained from taking on too much risk in light of ongoing uncertainty around monetary policy.

London's FTSE 100 and Madrid's Ibex 35 both closed with a solid 0.5% gain, while Frankfurt's Dax 40 rose 0.2%; the Cac 40 in Paris and FTSE MIB in Milan, however, suffered small losses of under 0.1%.

As such, the Stoxx 600 finished just 0.16% or 0.82 points higher at 510.84, with just 2.17 points separating its intraday high and low.

The pan-European benchmark has been trading within a tight range over the past week after having reached another all-time closing high of 512.67 on 28 March.

Investors had to contend with a busy agenda for economic data on Thursday: a whole host of service-sector surveys were out across Europe on Thursday, showing that activity was stronger than expected in March; inflation in Switzerland fell to its lowest level in two and a half years; while producer prices across the eurozone declined more than predicted.

Markets were also subdued ahead of the all-important US non-farm payrolls report on Friday, which could determine how the Federal Reserve acts on interest rates over the next couple of months. Fed chair Jerome Powell said on Wednesday that recent stronger-than-expected economic data hasn't deterred the Fed's outlook for inflation trending downwards.

"Stocks are making headway again this afternoon, though the possibility of a strong print in tomorrow’s US payrolls data looms large," says Chris Beauchamp, chief market analyst at IG.

In other news, minutes from a recent Riksbank meeting showed that Sweden's central bank expects to cut interest rate in "May or June". The minutes said: "The Riksbank’s updated forecast for the policy rate is expected to indicate a relatively high probability of a policy rate cut during the first half of the year and one or more further cuts in 2024.”

Data in focus

The Swiss Federal Statistical Office revealed that the consumer price index slowed to a year-on-year growth rate of just 1.0% in March, down from 1.2% in February and below the 1.3% expected by the market. This was the lowest reading since September 2021.

Eurozone producer prices dropped by 1.0% in February, accelerating after a 0.9% fall the month before and below the 0.7% decline expected by the market. This was the sharpest drop in producer prices since May 2023.

The second estimate of the closely watched HCOB eurozone composite purchasing managers' index was lifted to 50.3 for March, up from the initial reading of 49.9 and ahead of the February level of 49.2. The improvement was on the back of continuing strength in the services sector, with the services PMI rising to 51.5 from 50.2, making up for ongoing weakness in manufacturing, where the PMI fell to 46.1 from 46.5.

Meanwhile, the S&P Global UK services PMI dipped to 53.1 in March from 53.8 in February. This remained comfortably above the 50.0 mark that separates contraction from expansion and marked the fifth month of growth, but was still below the 53.4 consensus forecast.

Market movers

Mondi shares were 3% higher in London after DS Smith extended its deadline for the UK packaging group to make a revised takeover offer by two weeks. Mondi and DS Smith had tentatively agreed on a deal last month, only to be outbid by US rival International Paper last week.

Also in London, media group Future surged 16% as it reported a return to organic revenue growth in the second quarter, largely attributed to robust performances in Go.Compare, B2B sectors, and resilient magazine sales.

French luxury giant Kering gained 1% on the news it is spending €1.3bn on a historic building in Milan's fashion district, giving it one of the largest retail spaces in the city. The deal was thought to be the single largest asset sale in Italian real estate history.

Volvo shares were up 7% in Stockholm after the carmaker reported its best-ever month for sales in March, offloading 78,970 cars – a 25% increase on the year before.