European shares advance on rate optimism; UK elections in focus

By Jesus Calero and Shubham Batra

(Reuters) -European shares rose on Thursday amid optimism around U.S. interest rate cuts following soft economic data, while London markets gained as voting began in the UK with opinion polls predicting a historic win for the Labour party.

The pan-European STOXX 600 index rose 0.4% by 0816 GMT, led by a 1.3% rise in the automobiles and parts sub-index.

The sub-index was powered by German automotive supplier Continental, whose shares jumped 10.1% to a three-week high, with a trader pointing to pre-close comments on auto unit.

The UK's FTSE 100 advanced 0.7%, with markets waiting to see how large a majority the Labour Party might win.

"The UK outcome, widely expected to be a Labour victory, won't have much impact unless there's a big upset or surprising outcome, as markets have likely already discounted this," said Bas van Geffen, senior macro strategist at Rabobank.

French stocks advanced for a second day with a 0.6% rise amid intensified efforts by opponents of France's National Rally (RN) to prevent the far-right party from gaining power.

Weak U.S. data boosted sentiment on rate cuts as first-time applications for U.S. unemployment benefits increased last week, indicating a cooling labour market.

German industrial orders fell unexpectedly in May, declining by 1.6% on the previous month on a seasonally and calendar adjusted basis.

Among individual movers, UK's Smith & Nephew rose 6.3% after activist investor Cevian Capital disclosed a 5% stake in the medical equipment maker.

Redcare Pharmacy surged 10.4% after the German pharmaceutical retailer posted a 33% jump in second-quarter preliminary sales.

On the flip side, Roche dropped 2.2% after it announced plans to halt a trial for its experimental lung cancer drug due to lackluster results.

France's Pluxee fell as much as 10% after the voucher and benefits company reported weaker-than-expected third-quarter sales in Europe on Wednesday.

Sweden's Ericsson slipped 0.9% after the telecoms equipment maker recorded another impairment charge of 11.4 billion Swedish crowns ($1.09 billion) in the second quarter of 2024.

Meanwhile, comments by European Central Bank officials Philip Lane, Elizabeth McCaul and Piero Cipollone will be on investors' radar later in the day for more clues on the central bank's future path of interest rates.

Trading volumes are expected to be low on account of a public holiday in the United States.

(Reporting by Jesus Calero in Gdansk and Shubham Batra in Bengaluru; Editing by Mrigank Dhaniwala and Varun H K)