Europe close: Stocks boosted by falling inflation as Stoxx 600 nears record high

European stocks rose for the third straight day on Thursday, with the Stoxx 600 ending just inches away from its record high, as data showing falling inflation increased the odds of a rate cut by the European Central Bank in September.

The Stoxx 600 rose 0.76% to 524.57, just shy of its all-time closing peak of 524.71 reached on 15 May. The index has now risen 7.7% since 5 August to put it up 9.6% over the year-to-date.

The Dax benchmark in Frankfurt was at a record high on Thursday, gaining 0.69% to 18,912.57, after German inflation dropped its lowest level in more than three years, unexpectedly falling below the 2% target set by the European Central Bank.

According to the Federal Statistical Office, the annual growth rate of consumer prices slowed to just 1.9% in August, down from 2.3% in July. This was the lowest level recorded since March 2021, and well below the 2.1% expected by economists.

Spanish inflation data on Thursday also came in lower than forecasts, easing to just 2.2% from 2.8% – its lowest level since June 2023 – "raising the risk of a downside surprise in tomorrow's eurozone flash estimate and making a rate cut at the next ECB meeting all but certain," said Paolo Grignani, senior economist at Oxford Economics.

Meanwhile, there was a further boost as the eurozone's August Economic Sentiment Indicator recorded a surprise jump month on month, beating expectations of no gain. The ESI jumped to 96.6 from 96 in July, with services, industry and retail trade confidence driving the rise, while confidence among consumers and in construction remained broadly stable.

Spirits stocks gain

Spirits makers were in focus after China's commerce ministry said it will not impose provisional anti-dumping measures on brandy imported from the European Union, with Pernod Ricard, Remy Cointreau and Davide Campari-Milano making decent gains.

Pernod Ricard was given an extra lift after the spirits giant released its annual results, predicting a return to organic growth this new financial year after small dip in sales in the 12 months to 30 June. The French distiller reported net sales of €11.6bn for the year just gone, representing an organic decline of 1%.

German food delivery group Delivery Hero surged more than 12% after beating forecasts with its second-quarter numbers and announcing plans to list its Middle East business Talabat on the Dubai stock exchange.