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Markets’ Week Ahead: European stocks up ahead of ECB rate decision

A passer-by stops to view a screen displaying markets news, with Paris' benchmark CAC-40 index showed on top,.
A passer-by stops to view a screen displaying markets news, with Paris' benchmark CAC-40 index showed on top,. Copyright THIBAULT CAMUS/AP
By Indrabati Lahiri
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European shares climbed up as investors expect the ECB to keep rates steady at its monetary policy meeting this week.


European stocks started the week bright on Monday, drawing optimism from US equities, following the S&P 500 index touching record highs on Friday. 

However, impending interest rate decisions from the European Central Bank (ECB) and Bank of Japan later this week have kept investors on their toes.

The Stoxx 600 index was up 0.57 per cent to €471.8, while the CAC 40 inched up 0.4 per cent to €7,399.4. The FTSE 100 also advanced 0.06 per cent to £7,465.2.

Regarding the ECB decision, Michael Hewson, chief market analyst at CMC Markets said: "When looking at the economic performance of the euro area, we've seen little in the way of growth since Q3 of 2022, while inflation has also been slowing sharply. Yet, for all this economic weakness, the ECB has been insistent it is not close to considering a cut in rates, having hiked as recently as last September."

He added that no changes are expected this week with the main ECB refinancing rate currently at 4.5%. "However, with Q4 GDP due at the end of the month, and January CPI due on 1 February, calls for a March rate cut could start to get louder in the weeks ahead, especially since PPI has been in deflation for the last six months," Hewson said.

IT and banking stocks lead gains, luxury and energy shares lag

French IT company Capgemini was one of the top gainers on the CAC 40 index on Monday, inching up 1.90 per cent to €200.8. The company recently announced that it would be collaborating further with Amazon Web Services for enterprise genAI - generative AI - adoption.

BNP Paribas also climbed 1.73 per cent to €61.7, after the company revealed that it would be pushing for more gender parity among its new hires.

On the other hand, TotalEnergy slipped 0.86 per cent to €57.5. The company recently revealed that it would be restarting the Danish Tyra gas field this March.

Pernod Ricard also dipped 0.60 per cent to €141.6, following the company sharing that it would be growing its no-alcohol beverage range.

What to watch in the week ahead

The Bank of Japan will release its rate decision, as well as its quarterly outlook report, on Tuesday, followed by the ECB's rate decision on Thursday.

The euro area consumer confidence numbers are also out on Tuesday. A range of purchasing managers' index (PMI) numbers from France, Germany, the UK, the US and the euro area are due on Wednesday.

Business climate and business confidence reports from France, Germany and Turkey will also be available on Thursday, as well as US GDP numbers.

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