European shares inched up on Monday but gains remained in check as a rise in commodity-linked stocks was offset by uncertainty around the outlook for interest rates.
The pan-European STOXX 600 index rose 0.1% to hover below record highs hit last week.
Miners and oil & gas indexes climbed about 0.6% each, leading gains among European sectors as copper prices surged to record highs helped by China’s property support measures and better-than-expected industrial data.
Gold prices also hit fresh peaks, while crude prices edged higher amid political uncertainty in major oil producing countries including Iran and Saudi Arabia.
Countering the positive impact from rising commodity prices on equities, euro zone sovereign bond yields climbed after officials from the European Central Bank (ECB) and the Federal Reserve warned that the monetary easing path remained uncertain.
“The ECB will not shy away from starting its easing cycle before the Fed in June, with further rate cuts to follow: a total of 100bp cuts are in our books for 2024, with risks tilted to only 75bp (i.e. quarterly moves),” noted Vincent Chaigneau, head of research at Generali Investments.
Markets are pricing in around 65 bps (basis points) of ECB rate cuts in 2024, as per LSEG’s rate probabilities app, compared with 67 bps on Friday.
European shares end lower on rate cut jitters; Richemont shines
board member Isabel Schnabel said in an interview last week with Nikkei the central bank may slash interest rates in June, but should be cautious about further cuts in borrowing costs given uncertainty over the outlook.
Italian stocks slid 1.2%, with banks such as Banca Popolare di Sondrio and Banco BPM among the top decliners.
TotalEnergies climbed 1.2% after the French energy major’s Chief Executive Patrick Pouyanne said it had struck its first supply deal with Dangote Refinery in Nigeria following a meeting with Africa’s richest man, Aliko Dangote.
Volkswagen dipped 1.3% after Morgan Stanley downgraded the automaker to “under-weight” from “equal-weight” and turned cautious on German carmakers overall, pointing to shrinking margins and the potential for trade disputes.
Stock markets in Switzerland, Sweden and Denmark were closed for Whit Monday holiday.
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