UPDATE 1-European shares set to end week higher after ECB signals end to rate hikes

Reuters · 09/15 08:09

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ECB's Villeroy: loose budgets could fuel more inflation

H&M's quarterly sales lag expectations, shares fall

Luxury stocks rally on encouraging Chinese macro data

STOXX 600 rises 0.9%, up 2.1% so far this week

Updated at 0750 GMT

By Bansari Mayur Kamdar

Sept 15 (Reuters) - European shares extended their rally on Friday, on track to end the week higher, following a sharp jump in the previous session after the European Central Bank (ECB) signalled an end to its rate hike cycle.

The STOXX 600 .STOXX rose 0.9%, supported by gains in China-exposed luxury stocks .STXLUXP after better-than-expected economic data in the world's second-largest economy.

The index is up 2.1% so far this week.

Paris-listed Kering PRTP.PA and LVMH LVMH.PA climbed 2.7% and 3.2%, respectively.

The pan-European STOXX 600 index its biggest percentage gain in six months on Thursday following the ECB's 25 basis point (bps) hike, its 10th and likely final hike in a 14-month-long fight against inflation.

"We continue to see cuts before September 2024 - implying a 12-month pause at 4.00% - and believe rates are still unlikely to fall back below in 2025 given our ongoing concern about persistent inflation in the medium term," said economists at Deutsche Bank in a .

Overly loose budget policies risk fuelling inflation at a time when the central bank is fighting to bring it lower, said ECB policymaker Francois Villeroy de Galhau.

Investors are focused on central bank meetings week, with the U.S. Federal Reserve and Bank of America set to announce their rate decisions.

London's blue-chip FTSE 100 .FTSE led weekly gains in the region, adding 0.7% on Friday.

Sweden's H&M HMb.ST shed 4.2% on reporting flat sales in its most recent quarter, lagging expectations as the fashion group struggles to attract customers while the cost-of-living crisis drags on.

Bayer BAYGn.DE rose 1.3% on its CEO's plans to cut management jobs.

Chrysler parent Stellantis STLAM.MI edged higher but was among the worst performers on France's CAC 40 .FCHI, after U.S. auto workers launched a strike at Detroit Three.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Janane Venkatraman and Sonia Cheema)

((BansariMayur.Kamdar@thomsonreuters.com; X: @BansariKamdar;))