European shares rise from eight-week lows as miners, tech advance

By Sruthi Shankar

(Reuters) -European shares inched up on Friday on gains in mining and technology stocks although the main benchmarks were set for steep weekly losses on growing concerns over a slowing global economy and the debt ceiling talks in the United States.

The pan-European STOXX 600 index rose 0.2% after closing at an eight-week low on Thursday.

U.S. President Joe Biden and top congressional Republican Kevin McCarthy are closing in on a deal that would raise the government’s $31.4 trillion debt ceiling for two years while capping spending on most items.

Concerns about whether the two sides could reach a deal and avert a debt default have weighed on markets in the recent weeks.

“It is the key focus point because it’s important for growth dynamics in the U.S.,” said Peter Garnry, head of equity strategy at Saxo Bank.

“We expect the two parties will reach a debt deal that will have a meaningful impact on economic growth. If they go too aggressive on reducing the deficit going forward, then obviously that will create some headwinds for the U.S. economy.”

Miners jumped 2.5%, leading sectoral gains in Europe, as metal prices rebounded and Rio Tinto climbed 3.5% after Morgan Stanley upgraded the stock to “overweight” from “equal weight”.

Technology stocks extended their rally for a second day after U.S. chipmaker Nvidia’s strong forecast, with ASM International jumping 4.7% to a near 18-month high.

European stocks rallied to multi-year highs earlier this month, with the German DAX notching a record high as investors took heart from upbeat earnings reports despite signs of a slowing economic growth and sticky inflation.

The European Central Bank needs at least two more 25-basis-point interest rate hikes and market pricing of early 2024 rate cuts are overly optimistic, Dutch Central Bank chief Klaas Knot said in an interview published on Thursday.

Shares of debt-ridden French supermarket company Casino slumped 8.6% as they resumed trading after being suspended earlier this week.

The retailer said it was officially starting court-backed negotiations with its creditors, seeking a way out of its financial woes while weighing two tie-up bids from wealthy investors.

Shares of ProSiebenSat.1 slipped 0.7% after the German media group reported a significant drop in first-quarter operating profit, citing a challenging macroeconomic environment and restraint in the advertising market.

Faurecia added 4.1% after Jefferies upgraded the French car parts maker to “buy”.

German real estate firm Aroundtown slipped 3.8% to hover near record lows.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips and Arun Koyyur)