German stocks touch their highest levels in 4 months amid signs of easing inflation

German stocks led gains in Europe on Wednesday after data indicated a decline in inflation in the country’s most populous state, reinforcing expectations that the European Central Bank will cut interest rates next year.

The German DAX index rose 1 percent to touch a four-month high after data showed that consumer prices in the state of North Rhine-Westphalia fell 0.3 percent on a monthly basis in November and rose 3 percent on an annual basis.

Preliminary inflation data for Germany will be published later today, and comprehensive inflation data for the euro zone will be published on Thursday.

European bond yields fell, with German 10-year bond yields falling to the lowest level in more than three months at 2.4 percent.

The European STOXX 600 index rose 0.5 percent, with shares in the interest rate-sensitive real estate sector rising by more than two percent.

Traders expect interest rates to be cut by more than 105 basis points in 2024 from an expectation of about 95 basis points the previous day.

Although most regional markets achieved gains, the British Financial Times 100 index fell 0.1 percent, with the pound sterling rising to its highest level in three months.