By Pranav Kashyap
(Reuters) -European shares started the week on a positive note on Monday, as investors prepared for U.S. inflation data to gauge the Federal Reserve’s monetary policy path and a deluge of other key data from Europe.
The continent-wide STOXX 600 index was up 0.3%, with all European markets trading in the green.
Oil and gas stocks gained 0.7% as oil prices rose for a fifth session after U.S. recession fears eased while geopolitical tensions in the Middle East also supported. [O/R]
Financials were also up 0.7%, as Hannover Re surged nearly 5% after the German reinsurer reported its first-half results. The sector was the top contributor to the gains on the benchmark index.
Last week, the absence of major economic data resulted in a tepid performance for the STOXX 600, which managed to eke out a modest weekly gain by Friday.
Investors will be focused on the U.S. consumer prices data set to drop on Wednesday, which will shape the direction for the global monetary policy.
A massive selloff swept across global currencies and stock markets last week, fuelled by mounting recession fears in the U.S. economy. However, better-than-expected weekly jobs data in the U.S. calmed investors.
“Markets are still in recovery mode… however, all that data is going to be important for market participants to assess whether we are in for soft landing or if something more sinister is on the cards,” Lilian Chovin, head of asset allocation at Coutts said.
The Federal Reserve meets on Sept. 18-19 and markets are pricing in a 50% chance of 50 basis point cut.
Employment data from the UK and inflation numbers from Spain will also be on investors’ radar later in the week. Euro zone’s flash employment, GDP and inflation production numbers are set for release on Wednesday.
Shares of BT Group soared 6.3% after India’s Bharti Enterprises agreed to buy around a 24.5% stake from the British telecommunication firm’s top shareholder, Altice UK.
JD Sports Fashion fell to the bottom of the index, losing 4.3% after Deutsche Bank cut its rating to “sell” from “hold”.
Trading volumes in August are relatively lower as many market participants are off for the summer.
“August typically sees much thinner liquidity… not everyone is back. We could see elevated volatility for weeks to come, but that could settle down as September comes and central banks start communicating again,” Coutts’ Chovin said.
(Reporting by Pranav Kashyap in Bengaluru; Editing by Sherry Jacob-Phillips and Mrigank Dhaniwala)
