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Markets’ week ahead: European stocks inch up on Japan rally

Gas prices are displayed at a gas station next to the headquarters of the European Central Bank, rear, in Frankfurt, Germany, on July 28, 2023.
Gas prices are displayed at a gas station next to the headquarters of the European Central Bank, rear, in Frankfurt, Germany, on July 28, 2023. Copyright Michael Probst/AP
Copyright Michael Probst/AP
By Indrabati Lahiri
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European markets started the week on a relatively strong note, with positive sentiment spilling over from Japanese stocks

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European stocks opened higher on Monday morning, fuelled by investors anticipating that the US Federal Reserve may almost be done with its monetary tightening cycle. This also led to the US dollar index dropping to 11-week lows at 103.5 on Monday morning.

Strong sentiment spillover from Japanese stocks, which touched three-decade highs on Monday on the back of robust earnings, also boosted European markets. Markets were also buoyed by a potential ceasefire between Israel and Hamas, which the US is currently negotiating.

TTF natural gas prices spiked 2.96% to €46.4/MWh on Monday morning, following Yemeni Houthi rebels taking control of an Israeli cargo ship in the Red Sea. Pharmaceutical giants Bayer also saw shares plunging to multi-year lows, following its blood-thinning medication trial being paused.

European markets pulled up by luxury goods stocks

On Monday morning, the CAC 40 index was up 0.22% to €7,249.4, with the Stoxx 600 also slightly up 0.04% at €455.9. However, the FTSE 100 index was down 0.14% to £7,493.42.

Amongst the top gainers on Monday morning was LVMH, with a 1.14% to €719.8, following Berluti announcing that that it would be designing the French uniforms for the Olympics opening ceremony.

TotalEnergies also reported a 1.07% rise to €62.5, following the company recently completing critical flow tests on its latest Orange Basin discovery in Namibia.

Among the top losers was Renault, dropping 0.76% to €35.3, following the company recently announcing a new electric city car made in Slovenia, which did not seem to be too popular with investors.

Schneider Electric also dropped 0.65% to €164.98. The company has recently announced a low-carbon steel partnership with ArcelorMittal.

What to watch in the week ahead

Later today, investors are awaiting a speech from Bank of England (BoE) Governor Andrew Bailey on Monday evening. It will hopefully shed more light about the BoE’s current monetary tightening policy and provide some insight into whether the governor still believes that “policy must do most of the work” to get inflation back to the 2% target.

Further down the week, the Federal Open Market Committee (FOMC) minutes will be released on Wednesday, providing a full picture into the agenda points discussed by the US Federal Reserve during its early November meeting. 

With investors already hopeful that the Fed may be willing to ease up its current policy, the FOMC minutes are highly anticipated.

The euro area consumer confidence flash figures for November are also due to come in on Wednesday and are expected to rise to -17.6, from -17.9 in October, as interest rate sentiment improves.

A slew of manufacturing and services purchasing managers’ indexes (PMIs) are also due to come in this week from the UK, France, Germany and the euro area, amongst others.

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