European stocks rise after US inflation data

European stocks recovered from previous losses and closed higher today, and investors increased their bets that the Federal Reserve (the US central bank) may cut interest rates later this month after the release of the US inflation report, which is in line with expectations.
The European STOXX 600 index had fallen earlier in the session, but closed with a 0.3 percent increase after US data showed that the consumer price index rose as expected in November on both a monthly and annual basis.

European stocks

The CME’s FedWatch tool showed that the odds of the US central bank reducing borrowing costs by 25 basis points next week reached 95 percent, compared to about 85 percent before the data was released.
Highly sensitive interest rates rose 0.1 percent to touch their highest levels since August 2015.

Reducing interest rates

More broadly, expectations of lower interest rates have been the main driver of the STOXX index’s 8.6 percent rise so far this year.
The aerospace and defense sector topped sector gains, advancing 1.4 percent and witnessing the largest increase this year among its peers.