European markets rally as investors anticipate key economic data

European stocks experienced a rise on Monday, with retail and basic resources sectors leading the gains. This positive momentum comes as investors prepare for a week filled with important economic data, all while keeping a close watch on U.S. Federal Reserve Chair Jerome Powell’s upcoming speech at Jackson Hole for insights into potential rate cuts.

The pan-European STOXX 600 index saw a 0.6% increase, hitting its highest level in over three weeks, thanks to widespread market gains. This strong performance follows the index’s largest weekly gain in three months, as it recovered much of its recent losses and remained comfortably above the 500-point threshold after briefly dipping below it earlier in August. Major regional markets in Germany, France, Italy, and Spain also saw gains ranging from 0.5% to 1.4%.

Miners benefitted from a 2% rise, driven by stronger metal prices, while retail stocks, particularly Zalando and JD Sports, showed significant upward movement. In contrast, defence stocks faced declines following news that Germany’s finance ministry might not approve additional military aid for Ukraine due to budget limitations. Companies such as Hensoldt, Renk, BAE Systems, Saab, Thales, and Leonardo saw their shares drop between 0.8% and 5.4%.

According to Daniela Hathorn, a senior market analyst at Capital.com, the market is entering a consolidation phase, which could lead to some uncertainty as investors reassess the landscape and consider how various factors might influence their strategies.

This week, investors are also focused on a series of critical economic reports, including eurozone inflation and PMI figures, along with U.S. PMI data and weekly jobless claims. However, the highlight of the week will be the global central bank meeting in Jackson Hole, Wyoming. Powell’s speech on Friday is highly anticipated, as it may provide crucial insights into the future direction of the Federal Reserve’s monetary policy. Additionally, the minutes from the Fed’s July policy meeting are set to be released on Wednesday.

Monday’s gains reflect a positive market sentiment as investors prepare for a busy week ahead. The market’s resilience and recovery highlight the cautious optimism among investors, though the upcoming economic data and central bank discussions will be pivotal in shaping the next steps in global markets.

Fidelity European Trust PLC (LON:FEV) aims to be the cornerstone long-term investment of choice for those seeking European exposure across market cycles.

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