Market Wrap: Europe is catching up🔼 Will Eurozone CPI data determine the ECB’s rate hike?

The Euro Stoxx 50 opened the session up 0.60%, while the DAX gained 0.55% — European stock markets are moving higher despite growing expectations of an interest rate hike by the ECB, with the main drivers of the gains being a strong rally in tech stocks and slightly lower oil prices.

Flash data released today by Eurostat confirmed that inflation in the eurozone accelerated to 3.2% year-over-year in May (up from 3.0% in April)—above the ECB’s target and the highest level in over 2.5 years—with core inflation jumping to 2.5% and services inflation surging to 3.5% year-over-year. Market expectations for a 25-basis-point ECB rate hike as early as the June 11 meeting have surged, and Governing Council member Rehn described a potential move as a “preemptive hike,” confirming that inflation expectations remain anchored. Energy accounts for the lion’s share of the acceleration in inflation—the energy component rose by 10.9% y/y in May—driven by the conflict in the Middle East. The swap market prices the probability of a rate hike at the June 11 meeting at 97%.

Among the Euro Stoxx 50 sectors, telecommunications/communications (+4.72%) and technology (+2.17%) performed the best, while the industrial sector (+1.31%) and the financial sector (+1.03%) also provided a strong boost. Energy (–1.12%) and healthcare (–0.80%) closed in the red—the latter due to negative news from biotech companies.

Company Information

• Prosus recorded the biggest gain in the Euro Stoxx 50, jumping 10.73%.  EU antitrust authorities have granted Prosus additional time—at the request of Naspers—to fulfill its obligation to significantly reduce its stake in Delivery Hero, which is one of the conditions tied to the acquisition of Just Eat Takeaway in 2025. The new deadline remains confidential.

• Infineon Technologies rose 5.27% during the day, boosting its impressive year-to-date gain to +125.7% — the company is the clear leader of the index this year, and the rally among chipmakers is being driven by growing demand for data centers and AI; by comparison, STMicroelectronics jumped more than 8% today after doubling its revenue forecasts for data centers.

• Deutsche Post rose 3.55%, reaching its highest level in over four years — the boost came from Kepler Cheuvreux, which upgraded its rating to "buy," citing the company's robust transport volume as a key indicator.

• British American Tobacco fell 3.8%, extending its seven-day losing streak — an update on sales figures showed that consumers are shifting toward cheaper products, which is hurting the company’s margins and overshadowing its maintained annual forecast and growth in the smoke-free categories.

• Rheinmetall  fell 3.24% following earlier sharp gains — the arms manufacturer is correcting after a rally linked to the arms race; year-to-date, the stock is still down 24.5%, even though the company continues to benefit from increased defense budgets in Europe.