European shares rise from eight-week lows

European shares inched up on Friday on gains in mining and technology stocks although the main benchmarks were set for steep weekly losses on growing concerns over a slowing global economy and the debt ceiling talks in the United States.

The pan-European STOXX 600 index (.STOXX) rose 0.2% after closing at an eight-week low on Thursday.

US President Joe Biden and top congressional Republican Kevin McCarthy are closing in on a deal that would raise the government’s $31.4 trillion debt ceiling for two years while capping spending on most items.

Concerns about whether the two sides could reach a deal and avert a debt default have weighed on markets in the recent weeks, reported Reuters.

“It is the key focus point because it’s important for growth dynamics in the US,” said Peter Garnry, head of equity strategy at Saxo Bank.

“We expect the two parties will reach a debt deal that will have a meaningful impact on economic growth. If they go too aggressive on reducing the deficit going forward, then obviously that will create some headwinds for the US economy.”

Miners (.SXPP) jumped 2.5%, leading sectoral gains in Europe, as metal prices rebounded and Rio Tinto (RIO.L) climbed 3.5% after Morgan Stanley upgraded the stock to “overweight” from “equal weight”.

Technology stocks (.SX8P) extended their rally for a second day after U.S. chipmaker Nvidia’s strong forecast, with ASM International (ASMI.AS) jumping 4.7% to a near 18-month high.

European stocks rallied to multi-year highs earlier this month, with the German DAX (.GDAXI) notching a record high as investors took heart from upbeat earnings reports despite signs of a slowing economic growth and sticky inflation.

The European Central Bank needs at least two more 25-basis-point interest rate hikes and market pricing of early 2024 rate cuts are overly optimistic, Dutch Central Bank chief Klaas Knot said in an interview published on Thursday.

Shares of debt-ridden French supermarket company Casino (CASP.PA) slumped 8.6% as they resumed trading after being suspended earlier this week.