Equity market's significantly successful run in STOXX 600, unbroken for close to four years; attention shifts towards Federal Reserve decisions and tariff modifications.
European Shares Surge Anew: Focus on Trade Tensions and Fed Meeting
European equities continued their upward momentum on Monday, with investors keeping a close eye on trade war developments and the upcoming U.S. Federal Reserve policy meeting later in the week.
The pan-European STOXX 600 index marked its 10th consecutive day of gains, its longest winning streak since August 2021, closing 0.2% higher. Germany's main stock index soared 1.3%, almost touching an all-time high, while other local bourses ended positively, barring France's CAC 40, which dipped 0.5%. London markets were closed for a bank holiday.
On STOXX 600, insurers led the sectoral gains, adding 1.1%, as did real estate, which climbed 0.8%. The European aerospace and defense index rose over 1%, and financials gained 0.7%. However, energy shares limited overall growth with a 0.6% decline, reflecting weaker oil prices. Dutch-listed shares of Shell fell 1.9%, following rumors of a potential acquisition of rival BP.
Trade tensions between the U.S. and China have been easing somewhat in recent weeks, fostering investor optimism. While the specifics of the agreement have not been revealed, there's been a promise of continuous communication and cooperation. "The markets are shrugging off the stress of trade tensions and are positioning for an essential trade deal in the coming days," stated Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
However, President Trump's announcement of imposing a 100% tariff on movies produced outside the U.S. did cast a layer of uncertainty. The focus is also on central banks' decisions, particularly the Fed, which is expected to leave rates unchanged on Wednesday, and the Bank of England's rate decision, due later this week.
Erste Group surged 6.7% following the Austrian lender's announcement of acquiring 49% of Polish-based Santander Bank Polska and 50% of Santander TFI, after agreeing terms with Spanish bank Banco Santander SA. A survey also revealed that euro zone investor morale rebounded more robustly than anticipated in May, despite remaining at a lower level.
Enrichment Insights:
Recent two-day talks between the U.S. and China resulted in the establishment of a new "trade consultation mechanism" to facilitate ongoing negotiations and resolve differences. While the talks are positive, high tariffs remain unchanged, and trade frictions persist, dampening the immediate impact on European stocks. Both countries continue to use non-tariff barriers to restrict major imports and exports, such as China limiting U.S. beef, poultry, and liquefied gas imports, and the U.S. raising docking fees for Chinese cargo vessels.
- Investors are maintaining a close watch on the index index, with the pan-European STOXX 600 marking its 10th consecutive day of gains.
- Trade tensions between the U.S. and China have been easing slightly, which has fostered some optimism among investors, yet high tariffs and trade frictions persist.
- Financial news and central banks' decisions, such as the U.S. Federal Reserve's policy meeting and the Bank of England's rate decision, are attracting much attention from investors in the realm of finance and business.
- In the technology and business sector, Erste Group surged following its announcement of acquiring stakes in Polish-based Santander Bank Polska and Santander TFI, indicating a significant change in business operations.
