European stock markets hovered at one-month highs on Monday after data showed a surprise rise in German exports and on firmer expectations of a new wave of stimulus by the European Central Bank later this week. The pan-European STOXX 600 index opened higher but was down 0.1% as losses in the airlines and commodities sectors outweighed gains in oil and auto stocks.
German exports rose 0.7% in July versus expectations of a drop of 0.5%, indicating resilience in the face of impact from tariff disputes and Brexit uncertainties. The latest data follow a streak of underwhelming ones that has fuelled concerns that Europe's biggest economy could tip into recession in the July-September quarter.
"Germany is the powerhouse of Europe. If (its) economy has the potential for a recession, then that's a real game-changer for ECB policy," said Craig Erlam, senior market analyst at Oanda. With eurozone inflation well below target, market participants are betting that the ECB will cut its rate on bank overnight deposits, its primary interest rate tool, for the first time since 2016 when it meets on Thursday.
A slew of upbeat geopolitical news propelled stock markets to one-month highs last week and signs of resumption in the U.S.-China trade talks further brightened sentiment. However, mixed economic data from around the world has increased hopes of more stimulus by central banks to head off a global recession.
Markets were lifted on Friday after China said it would slash the amount of cash that banks must hold as reserves, while U.S. Federal Reserve Chairman Jerome Powell said the central bank would continue to "act as appropriate" to sustain economic expansion. Air France slid to the bottom of the index after disappointing August numbers, while IAG fell 2.5% as British Airways pilots began a 48-hour strike. Together, the stocks put the travel and leisure sector on track for its worst day in nearly a month.
Commodity-lined stocks were the among biggest drag on the market, weighed down by a decline in base metal and iron ore prices. Germany's trade-sensitive DAX index was trading flat. Broadcaster ProSiebenSat 1 Media topped the STOXX 600 after brokerage UBS upgraded the stock to "buy" from "neutral".
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