European shares rise as investors await US inflation
European shares rose in cautious trading on Thursday, with Milan leading the major bourses higher at 0.6%, as investors waited for the US inflation reading that could shape how aggressively the Federal Reserve moves at next week’s policy meeting.
The market is being driven less by optimism about growth than by a repricing of rate risk. A softer-than-feared consumer price report would ease pressure on Treasury yields, which have been hovering near 5%, and could help stabilise global equities after a bruising bond sell-off. If inflation comes in sticky, the Fed will have more reason to keep policy restrictive, raising the cost of capital for equities and prolonging the pressure on duration-sensitive assets.
The pause in the bond rout is already visible in Europe. Italy’s 10-year BTP yield was steady at 4.85%, with the BTP-Bund spread unchanged at 87 basis points, while US Treasuries also held near recent highs. That matters for financial conditions across asset classes: higher sovereign yields tighten valuations, weigh on cyclicals and make investors more selective in chasing equity gains.
Energy prices offered some relief. Brent fell 3.2% to $104.2 a barrel and WTI dropped 2.9% to $99.5 after recent gains, helped by the absence of fresh disruption in Iran. Lower oil reduces immediate inflation pressure and supports sentiment for import-heavy economies in Europe, even if it also dents energy producers including Eni and Saipem, which were lower on the day.
Wall Street futures were firm ahead of the inflation release, with S&P 500 futures up 0.5% and Nasdaq futures up 0.6%, suggesting investors were positioning for at least a temporary reprieve if the data confirms expectations that headline US inflation held at 3.4% in August while core eased to 2.4%.
In Milan, Avio jumped 7.1% and Moncler added 2.7%, while Prysmian gained 1.7% and Intesa Sanpaolo rose 1.6% after approval of the capital increase tied to its MPS offer. The bank complex remains in focus as consolidation and capital actions continue to reshape Italian financials, with MPS up 1.2% and Poste Italiane and Tim also firmer.
For investors, the key question is whether the inflation report can extend the pause in bond selling long enough for equities to reassert their recent resilience. A benign reading would likely support rate-sensitive stocks, banks and broader European benchmarks. A hot print would revive yield pressure, put the euro and global risk assets back on the defensive and likely keep Milan’s gains, and those of the wider region, on a short leash.
| Entity | Gains | Losses |
|---|---|---|
| European equities | ▲Easier risk sentiment | ▼Hot US inflation |
| Bondholders | ▲Pause in sell-off | ▼Further yield rise |
| Oil importers | ▲Lower crude prices | ▼Energy producers |
| Italian banks | ▲M&A and capital-action interest | ▼Higher funding costs |