European shares rise on hopes of Fed slowdown

US stocks extended last week's rally and European shares climbed on Monday as signs of a cooling US economy raised hopes that the Federal Reserve would slow the pace of interest rate hikes.

The Dow Jones Industrial Average gained 1.34%, the S&P 500 1.19% and the Nasdaq Composite 0.86%. The tech-heavy Nasdaq rebounded after taking a hit from a drop in Tesla (NASDAQ:TSLA) Inc shares and as traders awaited earnings from Apple (NASDAQ:AAPL), Google parent Alphabet (NASDAQ:GOOGL) and Amazon.com (NASDAQ:AMZN) in the coming days. US business activity contracted for a fourth straight month in October, indicating that the Fed's rate hikes are having the desired effect, raising hopes that the central bank may start to slow the pace of increases in the Fed funds target rate. "Investors are more confident that inflation will come down and the Fed can pause quickly," said Edward Moya, senior market analyst at OANDA in New York. "Flash PMIs (purchasing managers' index data) showed significant weakness in both the service and manufacturing parts of the economy, which is good news for investors expecting the Fed to pause early next year." The dollar survived another dubious Japanese intervention to rise against the yen, rising to 149.70 yen in early trade before retreating. Japan probably spent 5.4 trillion-5.5 trillion yen ($36.16 billion-$36.83 billion) in yen buying intervention last Friday, according to estimates by Tokyo money market brokerages. Japanese officials did not confirm whether there was intervention. Sterling fluctuated on the news that Boris Johnson has withdrawn from the race for the UK prime ministership. Chancellor of the Exchequer Rishi Sunak will become the UK's next prime minister after winning the Conservative Party leadership race, which could reduce some of the political uncertainty over sterling. Europe's STOXX 600 index closed up 1.4% at the highest level in nearly a week, with utilities, media and travel and leisure leading the gains. (EU) Markets are still pricing in a 75 basis point rate hike next month, but have reduced bets on a move in the same direction in December. Peak rates have also fallen to around 4.87% from above 5% at the start of last week. Fed officials said the pace of tightening will be at the center of policy discussions at the November meeting. Source: investing.com Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!