European shares close at their highest levels in a week

by Jonathan Adams
European stock markets

The pan-European Stoxx 600 closed up 0.5%, with the insurance sector leading gains with a 1.6% rise

European shares closed at their highest levels in one week on Monday, with investor optimism over interest rate cuts from major central banks back to the fore, while Spanish defence firm Indra climbed after a strong first-quarter profit.

The pan-European Stoxx 600 closed up 0.5%, with the insurance sector leading gains with a 1.6% rise.

Supporting sentiment, ECB policymakers Philip Lane, Gediminas Simkus and Boris Vujcic said separately that the latest inflation and growth data strengthened their belief that inflation will head back to the central bank’s 2% target by the middle of next year.

European stocks have declined from the beginning of the year due to uncertainties including the health of European businesses, Middle East tensions and the European Central Bank’s policy outlook beyond June.

The ECB’s concern is that if negotiated wage rates continue their sharp rise then it could be more difficult to get inflation risk under control, Scotiabank analysts stated in a note.

The Stoxx 600 is up nearly 6% year-to-date, lagging the more than 8.1% increase in its US benchmark peer S&P 500, whose rally has also halted due to doubts about the timing of the Federal Reserve’s first interest rate cut.

On the day, energy-heavy Oslo’s all-share index outperformed the broader region with a 1.4% rise, tracking higher crude prices after Saudi Arabia raised June crude prices for most regions and as prospects of a Middle East ceasefire deal appeared dim.

Among individual European shares, Indra climbed 8.8% after the defence and technology firm reported a 40% rise in first-quarter net profit, supported by strong orders.

Maurel et Prom gained 7.3% after the French oil group got a specific license for its operations in Venezuela.

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