European stock markets trade modestly higher

The STOXX 600 index up 0.2%, led by gains in defence and tech companies that helped offset losses in healthcare stocks

Stocks in Europe edged up on Thursday. A holiday-shortened week has limited some of the activity across markets.

Stocks have kept a largely upbeat tone and currencies are much steadier as investors shrug off AI bubble worries that had roiled equities earlier in November.

European markets traded modestly higher, with the STOXX 600 index up 0.2%, led by gains in defence and tech companies that helped offset losses in healthcare stocks.

With a U.S. rate cut largely seen as a near-certainty next month against the backdrop of an upbeat earnings season, the most likely direction for stocks is going to be upwards, analysts said.

As long as your main engine is going nicely, then a lot of the worries about valuations just get pushed up to the back foot for the time being, until something else comes along, IG chief markets strategist Chris Beauchamp said.

He added that the most likely catalyst to derail a rally would come in the form of renewed concern over spending on AI, as has been the case for weeks.

That is the market’s kryptonite at the moment, he said.

In the currency market, dollar held steady against a range of currencies. Sterling retreated from near four-week highs hit on Wednesday after British finance minister Rachel Reeves’ budget helped alleviate some concern about Britain’s long-term finances. The pound was unchanged at $1.324, as was the euro at $1.1593.

The Japanese yen was in the spotlight, having firmed to 156.375 per dollar from nearly 158 a week ago. Investors are watching for possible intervention from Tokyo after weeks of caution from authorities to stem the currency’s relentless decline.