The continent-wide STOXX 600 index ended 0.48% higher, with tech, defence stocks and utilities up more than 1.2% each
European stocks closed Monday’s choppy session at a two-week high ahead of corporate earnings and a ECB policy decision later this week, while some caution prevailed after China’s weekend stimulus promises underwhelmed.
The continent-wide STOXX 600 index ended 0.48% higher, with tech, defence stocks and utilities up more than 1.2% each.
France’s main index underperformed other major markets. Credit ratings agency Fitch revised the country’s outlook to “negative” from “stable” on Friday.
The European Central Bank is expected to deliver another interest rate cut on Thursday after recent data indicated the euro zone economy was in worse shape than when policymakers last met.
Traders are pricing in a near 100% probability of a 25 basis points rate cut this week, up from 20% when the ECB met last month. Money markets have also moved to almost fully price in another such move in December.
Current indicators point to continued weakness in the German economy in Q3, the economy ministry said in its monthly report. The federal statistics office is scheduled to release preliminary data for Q3 GDP at the end of this month.
While the ECB will likely not scrap its meeting-by-meeting approach, a probable higher emphasis on the growth risks and less concerns about inflation risks should support expectations of gradual rate reductions at the forthcoming meetings, said Martin Wolburg, senior economist at Generali Asset Management.
The STOXX index is less than 1% away from an all-time high, reflecting investors’ confidence that lower borrowing costs will help revive the economy.
Globally, the focus was firmly on China where the government on Saturday pledged to significantly increase debt, but left investors guessing on the overall size of the stimulus.
LVMH, Hermes, Kering and other French luxury stocks exposed to China dropped between 0.4% and 3.8%.
