European shares started the week positively on Monday as investors geared up for crucial U.S. inflation data, which will influence the Federal Reserve’s monetary policy decisions. Other significant data releases from Europe are also anticipated. The STOXX 600 index rose by 0.3%, with all European markets trading higher.
The oil and gas sector gained 0.7%, driven by a fifth consecutive rise in oil prices. This increase was supported by easing U.S. recession fears and heightened geopolitical tensions in the Middle East. Financial stocks also saw a 0.7% increase, with Hannover Re, a German reinsurer, leading the sector with a nearly 5% surge after announcing its first-half results. This made financials the top contributors to the STOXX 600’s gains.
The previous week saw the STOXX 600 deliver a modest weekly gain despite a lack of major economic data. Investors are now turning their attention to U.S. consumer prices data, due on Wednesday, which will be crucial in shaping global monetary policy.
Last week’s markets experienced a significant selloff, driven by growing recession concerns in the U.S. However, better-than-expected weekly jobs data helped calm investor nerves. Lilian Chovin, head of asset allocation at Coutts, noted that markets are still in recovery mode, and the upcoming data will be critical in determining whether a soft landing or something more severe is on the horizon.
The Federal Reserve’s meeting on 18-19 September has markets pricing in a 50% chance of a 50 basis point rate cut. In addition, UK employment data and Spanish inflation numbers will be closely watched later in the week. Eurozone flash employment, GDP, and inflation production figures are also set for release on Wednesday.
In corporate news, BT Group shares jumped 6.3% after India’s Bharti Enterprises agreed to purchase a 24.5% stake from the company’s largest shareholder, Altice UK. On the other hand, JD Sports Fashion dropped to the bottom of the index, losing 4.3% after Deutsche Bank downgraded its rating from “hold” to “sell.”
Trading volumes in August remain low due to the summer holiday period. Chovin remarked that August typically experiences thinner liquidity, and volatility might persist for several weeks until September when central banks resume their communications.
JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
