Banks boost European stocks as investors follow bond moves
European stocks advanced on Monday, driven by interest-rate-sensitive banks and insurers as government bond yields continued to rise, while hopes for a peace deal in the Ukraine crisis still faltered. reinforced the feeling.
The pan-European STOXX 600 index climbed 0.7%, holding close to pre-war levels reached last week. The benchmark index is within 8% of its all-time high at the start of January. European banks jumped 2.3% after Wall Street’s gains on Friday, when bets on aggressive interest rate hikes by the US Federal Reserve boosted financial stocks.
Benchmark US and European bond yields jumped again on Monday, with a deepening inversion in the US yield curve signaling that markets believe recession risks are rising. “The markets have moved on the geopolitical situation and the focus is on the Fed,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management. “We don’t seem to have peaked inflation so we haven’t seen any peak aggressiveness from the Fed either.”
Traders also lifted bets on rate hikes by the European Central Bank in the face of soaring inflation. “Increased warmongering towards the Fed is making life more difficult for the ECB because the weak euro is inflationary, but we think the ECB is going to be more focused on growth than the Fed,” said Carrier.
Ukrainian President Volodymyr Zelenskiy said on Sunday the country was willing to assume neutral status and compromise on the status of the eastern Donbass region. Further peace talks with Russia are expected to take place this week in Turkey. Meanwhile, oil prices fell more than $5 a barrel after financial hub Shanghai launched a two-stage lockdown to contain a spike in COVID-19 infections.
German chemicals giant BASF gained 3.5% after HSBC upgraded the stock to “buy”, saying “resilient demand” will likely help first quarter earnings. Shares of Apple’s European suppliers, including STMicroelectronics and ams, fell nearly 1% after the Nikkei reported that Apple planned to cut production of its iPhone and AirPods devices. Its Frankfurt-listed shares fell 1.0%.
Overall, the tech sector was flat, while Nasdaq futures were pointing to losses of around 0.4% at the open on Wall Street. Orpea fell 0.8% after news that the French government planned to file a criminal complaint against a homecare group over allegations of mistreatment of elderly patients.
In the UK, the oil majors and Barclays kept the FTSE 100 under pressure. The British lender fell 2.9% after disclosing a loss of around 450 million pounds ($591.80 million) on mismanaged structured products.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)