European Stocks Rise Amid Expected US Inflation Data and Company Earnings

European Stocks Rise Amid Expected US Inflation Data and Company Earnings

European markets edged up on Monday, with the pan-European STOXX 600 rising 0.3%. Investors are waiting for the publication of the US consumer price index and corporate results. Real estate and food delivery stocks led the charge, while budget retailers’ shares are expected to outperform despite a potential slowdown.

Sector Performance Highlights

European stocks increased slightly on Monday, February 12, 2024, paving the way for a week packed with company earnings, economic data releases, and speeches by Federal Reserve officials. The expectation is building for Tuesday’s release of January U.S. inflation statistics, which might shift the Fed’s rate trajectory.

The pan-European STOXX 600 was up 0.3% to 486.24 at 10:53 am. London time. Major markets followed suit, with Germany’s DAX and France’s CAC 40 each up roughly 0.3%. Despite the bustle of activity, Novo Nordisk, Just Eat Takeaway, Delivery Hero, and Tod’s SpA emerged as the day’s leaders.

Despite the positive news, GSK and Tritax Big Box REIT shares fell sharply. However, Nordex SE shares increased 4.2% after the German wind turbine manufacturer disclosed preliminary consolidated revenues for 2023 that exceeded the higher end of the expected range.

Market optimism is driven by US performance

The S&P 500’s record close and the prospect of potential Fed rate cuts fueled the optimism in European markets. Real estate stocks took the lead, with construction companies close behind. Just Eat and Delivery Hero took the focus, growing by 6.3% and 5.7%, respectively.

Deutsche Bank analysts increased their target price for Just Eat while decreasing their expectations for Delivery Hero. Several European heavyweights, such as Heineken, Airbus, Renault, Natwest, and Commerzbank, will report earnings this week. Global corporations such as Sony, Coca-Cola, and Airbnb will also participate.

With US stock futures nearly flat overnight and the S&P 500 hitting a record high last week, investors are keeping a close eye on the US consumer price index, set to be released on Tuesday. The data could shed light on the Fed’s rate path and its potential impact on the global economy.

While market pricing indicates a push for central banks to cut interest rates, some analysts warn that the market may be overly optimistic. The upcoming inflation report will be critical in determining the course of monetary policy.

Economic Outlook and Sector Trends

Investors are closely monitoring consumer stocks and the central bank’s strategies to monitor economic growth and inflation. Budget retailers like Primark and B&M are expected to provide strong earnings visibility in 2024. Danske Bank Research predicts three interest rate cuts from the ECB this year, while Morgan Stanley predicts a strong correlation between the dollar and US government bond yields. Oil prices fell due to the Israel-Hamas war, and metals trading remained muted. Galp Energia expects lower earnings in 2024 due to limited refining activity. Central banks, monetary policy, and market forces will shape the investment landscape through 2024 and beyond.

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