With the gas and oil sector recording its best trading session in the last two months, European shares got a boost on Monday. Meanwhile, risk sentiment remained in check because of bleak investor morale in the eurozone, just ahead of the planned hike in the interest rates this month by the European Central Bank (ECB).
Oil gives a boost
There was a 0.5% gain in the pan-European STOXX 600 index after it had declined last week because of worries about a potential slowdown in the global economy. A holiday in the market kept trading volumes subdued.
Oil giants listed in London, such as Shell and BP Plc, along with TotalEnergies in France rose between 4.4% and 4.6%. These energy shares gave the STOXX 600 the biggest boost, as crude prices were up due to uncertainty in Libya, the Russian sanctions, and lower output from OPEC countries.
There was a 4.0% rally in the energy sector and a 0.9% rise seen in the London FTSE 100 index. Some of the other top sectors included miners and healthcare. Gains were limited because of declines in tech, auto, and real estate stocks, which brought down the German DAX index by 0.3% for the day.
Troubling data
On Monday, a Sentix survey disclosed that investor morale had declined this month in the eurozone to the lowest it had been since May 2020. This indicated that a recession was inevitable in the bloc. Meanwhile, data also showed that there was a less-than-expected increase in producer prices.
This data comes after consumer prices had risen to a record high, which cemented the expectation of a hike in the interest rates by the ECB. Investors are now waiting for Thursday when the minutes of the last meeting of the ECB will be disclosed.
Market analysts said that the minutes of the meeting would provide greater insight into what has been happening behind the scenes. They said that while there was optimism in the market, it was likely that a big bounce would be short-lived.
Economic growth worries
Investors have become concerned about the impact on economic growth because of the aggressive interest rate hikes by global central banks. This year, the continent-wide STOXX 600 index has already recorded a fall of 16%.
As far as company news is concerned, there was a 27.6% drop in Uniper, as there were talks of nationalization risks of the German utility in discussions of the bailout plan. There was also a 7.7% fall in building material supplier, Grafton Group after its CEO announced that he was stepping down from his position after 11 years.
A downgrade of its stock by JP Morgan saw the shares of AMS Osram AG plunge by 7.9%. The Austrian sensor maker’s stock was demoted from ‘neutral’ to ‘overweight’, which expressed concerns about the high levels of debt and exposure to the market.
The European Central Bank’s interest rate hike would shed more light on what to expect from the market in the near future and the impact on the economy.
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