Europe close: Shares rally on comments from Fed's Waller

(Sharecast News) - European shares rallied to close higher on Thursday on the back of comments from Federal Reserve Governor Christopher Waller suggesting the US central bank may still keep interest rates on hold this month.

Waller said he would wait until the release of US inflation data next week before making a decision. "But if inflation comes in hot I would consider a rate hike."

He added that borrowing costs were only "slightly restricting" consumer and business demand and warned "it may not take much acceleration in inflation to nudge me into supporting" an increase.

has said today he is leaning toward keeping interest rates steady at the central bank's September meeting, provided there are no surprises from upcoming inflation data.

"I'm not going to say let's wait until next year, but let's just wait and see if we get some improvement on this."

The benchmark Stoxx 600 index finished 0.55% higher at 649 with all major bourses higher.

Switzerland's SMI rallied to gain 0.19% despite data showing domestic inflation accelerated in August, snapping several months of cooling as renewed military action in the Middle East pushed global energy costs higher. Annual inflation rose to 0.8%, up from 0.4% in July, marking the highest reading since 2024, according to the Federal Statistical Office.

The FSO said the increase was driven by higher prices for petrol, diesel and heating oil, alongside rising housing rentals. Imported goods - including energy - saw a sharp uptick, underscoring the external pressures feeding into Switzerland's inflation profile.

Rising oil prices, owing to the latest escalation of conflict between the US and Iran, have pushed up inflation expectations in recent days, leading to a big surge in government borrowing costs in recent days.

Investors remained on edge as tensions in the Middle East escalated, with the US and Iran exchanging their largest barrage of attacks since July. Worries were heightened after far-right Israeli defence minister Israel Katz said Tel Aviv would "return Iran deep into the Stone Age" if it attacked Israel.

Renewed hostilities revived fears of a broader regional conflict and kept markets cautious, particularly with energy prices already elevated. Oil prices were up with US West Texas Intermediate 0.78% higher at $91.72 a barrel and Brent jumping 0.56% to $96.17.

Precious metals were higher as investors sought safe havens, sending spot gold up 2.91% to $4,497 an ounce and spot silver up 3.42% to $67.09.

"If the idea is to keep investors guessing, then the Fed is succeeding, but so far the data appears to lean towards the dovish argument. But as was the case 24 hours ago, everything rides on tomorrow's payrolls and then next Friday's inflation readings. Equities aren't out of the woods yet," said IG analyst Chris Beauchamp.

On the economics front, private sector activity across the eurozone expanded more or less as expected in August, according to the final reading of the S&P Global composite purchasing managers' index on Thursday, with solid growth across both the services and manufacturing industries.

The final estimate of the composite PMI was revised to 52.0, just 0.1 down from the initial estimate released two weeks ago but in line with July's eight-month high.

Employment increased for the first time in 2026, while pricing pressures remained stable, with easing input cost pressures combined with steady output price inflation.

In equities news, shares in UK house builders fell after Crest Nicholson issued a profit warning on lower sales.

Reporting by Frank Prenesti for Sharecast.com