May 6 2024: European shares climbed on Monday, buoyed by optimism surrounding potential interest rate cuts by major central banks. The positive sentiment was also supported by strong performances from companies like Indra and Maurel et Prom, despite challenges faced by others such as Atos and PostNL.
The pan-European STOXX 600 rose by 0.3% as of 0830 GMT, with UK markets closed for a bank holiday.
Investor confidence was bolstered by reports suggesting a stronger case for a June rate cut by the European Central Bank (ECB), particularly due to easing services inflation. Additionally, expectations of rate cuts from the Federal Reserve were reinforced by Friday’s softer-than-expected U.S. jobs report.
Michael Field, European market strategist at Morningstar, noted that while data favors the ECB’s position, the Fed is adopting a wait-and-see approach based on economic data trends.
Energy stocks were among the top gainers, benefiting from rising oil prices and geopolitical tensions, including prospects of a Gaza ceasefire.
Although European stocks have faced uncertainties regarding business health, Middle East tensions, and ECB policy beyond June, the STOXX 600 has shown a 6% year-to-date increase, albeit trailing behind the U.S. S&P 500’s 7% rise.
Goldman Sachs raised its earnings growth forecast for STOXX 600 companies to 6% from 3%, citing factors like higher commodity prices, persistent inflation, currency weakness, and stronger economic growth.
Indra saw a significant jump of 7.2% after reporting a 40% increase in first-quarter net profit, driven by strong orders amid heightened global tensions.
Maurel et Prom rose by 8.3% following the granting of a specific license for its operations in Venezuela, boosting investor confidence in the French oil group.
On the downside, Atos experienced a 5.2% drop amidst debt restructuring talks, potentially leading to significant shareholder dilution. PostNL also faced challenges with a 3.5% drop after reporting a wider-than-expected first-quarter loss.
In Germany, Deutsche Post saw a 3.6% decline, while Danish company Demant A/S fell by 3.6% after missing first-quarter sales expectations.