On Monday, key European stock indices rose significantly. The positive previous closing of trading on the US stock market became the major catalyst for growth in European stocks.
European stocks rise on optimism of US stock exchanges
On Monday, key European stock indices rose significantly. The positive previous closing of trading on the US stock market became the major catalyst for growth in European stocks.
By the time of writing, the STOXX Europe 600 index of Europe's leading companies increased by 0.96% to 424.39 points. At the same time, shares of German energy company Uniper SE were top gainers among the STOXX Europe 600 components. They added 7.1%.
Meanwhile, the French CAC 40 gained 0.89%, the German DAX rose by 1.28%, and the British FTSE 100 gained 1%.
Top gainers and losers
Shares of German airline Deutsche Lufthansa increased by 2.6%. The day before, the company had reached an agreement with the Vereinigung Cockpit union to increase pilots' salaries.
Stocks of Swedish appliance maker Electrolux AB dropped by 3.3% on news that the company was launching a cost reduction program amid falling market demand and weak results for the past quarter.
The market capitalization of Dutch multinational Koninklijke Philips NV advanced by 1.5%. The company's quotes grew despite the Dutch media reports that the Shareholders' Association VEB planned to sue Koninklijke Philips NV due to a global recall of respiratory machines of its production.
The shares of Swiss reinsurance company Swiss Re rose by 1%. The day before, the company's management announced that geopolitical tensions and permanent climate change provoked the demand for protection against risks. According to Swiss Re management, this fact will lead to an increase in insurance premiums.
Current market sentiment
On Monday, the positive outcome of the week's past two trading sessions in the US stock market became a significant upward factor for key European indices. On Thursday, the Dow Jones Industrial Average gained 0.61%, the S&P 500 went up 0.66%, and the NASDAQ Composite added 0.60%. On Friday, the DJIA increased by 1.19%, the S&P 500 rose by 1.53%, and the NASDAQ Composite advanced by 2.11%.
On Tuesday, investors will analyze fresh data from the US Department of Labor on the country's Consumer Price Index. According to experts' preliminary forecasts, the annual inflation rate fell to 8.1% in August from 8.5% in July.
The US Federal Reserve will also analyze the final data for August at its upcoming meeting in September. Analysts believe that even if inflation declines, the regulator will definitely raise the rate by another 75 basis points. Last week, Federal Reserve Chairman Jerome Powell announced that the central bank was hawkish to fight the record level of consumer prices in the US.
Notably, the European Central Bank raised the benchmark lending rate to 1.25%, the deposit rate to 0.75%, and the rate on margin loans to 1.5% last Thursday at its September meeting. At the same time, the discount rate was increased by 0.75% for the first time in history.
During its September meeting, the ECB also raised its forecast of consumer prices to 8.1% in 2022, to 5.5% in 2023, and to 2.3% in 2024. At the June ECB meeting, the preliminary figures were 6.8%, 3.5%, and 2.1% respectively.
According to the new ECB forecast, GDP growth in the euro area will total 3.1% in 2022 against the previously predicted 2.8%. At the same time, GDP forecasts for 2023 and 2024 were worsened to 0.9% from 2.1% and to 1.9% from 2.3% respectively.
Moreover, the European Central Bank's representatives noted that the regulator intended to continue raising the rate at its upcoming meetings. Therefore, European Central Bank President Christine Lagarde said that further interest rate increases would depend on incoming statistical data.
On Monday, it became known that industrial production in the UK unexpectedly declined by 0.3% in July compared to June, with the index falling by 0.9%. At the same time, analysts predicted a 0.4% increase in industrial production in July.
According to the Office for National Statistics (ONS), the UK's exports in July dropped by 4.2% compared to June, while imports fell by 1.6%.
According to market experts, weak UK data in July was further evidence of the many economic difficulties faced by the region today.
In August, the Bank of England's representatives predicted the UK would experience a recession at the end of 2022 and not emerge from it until early 2024.
Previous trading results
On Friday, European stock indices closed in the green zone. Stock market participants discussed the results of the European Central Bank's September meeting on monetary policy.
Consequently, the STOXX Europe 600 index of Europe's leading companies increased by 1.52% to 420.37 points. Shares of German energy company Uniper SE were top gainers among the index components. They added 12.3%. The STOXX Europe 600 index rose by 1.06% over the past week.
On Friday the French CAC 40 gained 1.41%, the German DAX rose by 1.43%, and the British FTSE 100 was up 1.23%.
Shares of British fire protection company London Security PLC plummeted by 25%. In the first half of fiscal year 2022, the company cut pretax profits due to a permanent increase in costs amid inflationary pressures.
Stocks of British retailer ASOS PLC fell by 0.7%. The company projected revenue and profit in the current fiscal year at the level of market expectations. At the same time, ASOS PLC's sales in August were weaker than analysts had expected.
On Friday morning it was reported that France's industrial production fell in July for the first time since April. This means that the country's leading companies have cut production amid falling demand and high price pressures.
Thus, the decline in July was 1.6% in monthly terms against an increase of 1.2% in June. At the same time, analysts forecasted the reduction of industrial production only by 0.5%.
