European stock markets started the week on an upbeat note as traders questioned central banks’ determination to keep raising interest rates amid growing evidence of an economic slowdown. Global.
The regional Stoxx 600 was up 1% in early trades on Monday, with London’s FTSE 100 up 0.8% and Germany’s Xetra Dax up 0.7%. The US stock and bond markets were closed for the July 4 holiday.
Stoxx has recorded weekly losses for four of the past five weeks amid rising inflation in the eurozone and the UK, caused by higher energy prices, with central banks increasing travel costs get a loan.
After a closely watched survey from the Institute for Supply Management showed growth in the U.S. manufacturing sector slowed sharply in June, however, money markets encouraged the Federal Reserve. the United States Federal Reserve, the most influential bank in the world, to slow its pace. rate increase.
Wall Street’s benchmark S&P 500 stock index closed 1.1% higher on Friday.
“In these negative environments everyone is trying to appear a little smart,” said Gergely Majoros, investment committee member at European fund manager Carmignac.
“All investors are looking for peak inflation and central bank hawkishness at its peak,” he said, warning that this market story may not survive as companies grappling with “this very significant slowdown of the economies in the US and Europe”.
Before companies report second-quarter earnings, strategists at Liberum said economic data now “shows a 25% decline [earnings per share] in the next 12 months for European companies”.
Analysts who track S&P 500-listed companies have forecast a 4.1% increase in total second-quarter earnings. According to FactSet, this will be the slowest annual profit growth since the last quarter of 2020.
Eurozone government bond prices fell on Monday, following a sharp rally late last week in response to the upbeat ISM survey. Germany’s 10-year yield on the Bund, which is inversely proportional to the price of debt and serves as a barometer for eurozone borrowing costs, rose 0.03 percentage points to 1.26%. The UK’s 10-year gilding yield also increased by 0.03 percentage points to 2.11%.
Elsewhere, Brent crude rose 0.3% to $112 a barrel as oil prices continued to find support from Western nations imposing sanctions on Russia, a producer of the commodity. growth, after the invasion of Ukraine.
The euro was steady against the dollar at $1.043, having fallen more than 8% against the US currency so far this year.