European shares rise on gains in bank, Ukrainian advances
Several banks expect another 75 bps rate hike in October. Even as concerns of high inflation remains in Europe, as well as a cost of living crisis, hawkish ECB signals have sent bank stocks up over 5% for the month, supporting much of the STOXX 600's 2% gains so far in September.
European shares rose on Monday after Ukrainian forces made rapid gains in recapturing some seized territories, while banks advanced for a third straight session on bets of more jumbo-sized interest rate hikes by the European Central Bank (ECB).
The pan-European STOXX 600 index rose 0.6%, following its first weekly gain in a month on Friday. The bank's index added 2.0% by 0811 GMT, extending gains from Thursday when the ECB raised its key rates by an unprecedented 75 basis points (bps) and promised further hikes. Several banks expect another 75 bps rate hike in October.
Even as concerns of high inflation remain in Europe, as well as a cost of living crisis, hawkish ECB signals have sent bank stocks up over 5% for the month, supporting much of the STOXX 600's 2% gains so far in September. Investors also followed developments around the looming energy crisis in Europe. European Union energy ministers on Friday tasked Brussels with drafting proposals within a few days to cap the revenues of non-gas energy producers and help power firms stay afloat.
On Monday, Ukrainian forces swept further across territory seized from fleeing Russian troops on Monday. Investors are expected to stick to resilient, more defensive parts of the market along with more exposure to value sectors when compared to growth, said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Markets are now looking ahead to U.S. inflation data later in the week and a policy decision by the Federal Reserve later in the month. "While we expect the August CPI release to provide further evidence that U.S. inflation is easing, peak inflation has not yet been reached in the Eurozone or UK, in our view," Haefele said.
Sweden's Electrolux fell 2.2% on plans to start a cost-cutting program in response to softer-than-expected demand and weak earnings against a backdrop of high inflation. Orpea shares plunged 19.1% after the debt-laden French care home company said its financial performance is expected to decline further in the second half of the year.
Swiss Re rose 1.4% as it said global geopolitical tensions, macroeconomic developments, and climate change have heightened demand for risk protection and will lead to increased premiums. Separately, Sweden's right bloc inched into the narrowest of leads with around 90% of votes counted after Sunday's general election, with results pointing to a new government after eight years of Social Democrat rule.
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