European stocks hit a two-week high on Monday on hopes of some easing in energy prices and banks rose to nearly four-week highs on bets on higher interest rate hikes. big in Europe.
* The pan-European STOXX 600 index gained 1.8%, after closing its first weekly gain in a month on Friday.
* Investors focused on attempts to push through multi-billion euro packages to prevent utilities from collapsing in the face of cash shortages and to shield households from onerous energy bills.
* “We are still seeing an extension of the positivity that emerged last week when steps were taken in Europe to cap energy prices,” said Stuart Cole, chief macroeconomist at Equiti Capital.
* “This has greatly raised hopes that inflation may peak sooner than previously thought and that central banks, while still expected to maintain their aggressive stance on raising interest rates in the short term, they may not have to increase them as much as originally feared.
* However, keeping energy prices artificially lower risks stoking domestically generated core inflation, which could change terminal interest rate expectations, Cole said.
* Banks, gaining in an environment of higher interest rates, rose. The bank index jumped 3.4%, extending gains from Thursday when the ECB raised interest rates by 75 basis points and promised further hikes.
* All major sectors in Europe rose, with retail climbing 4.5%.
* Aggressive signals from the ECB have sent the banking index up nearly 10% on a month basis, supporting much of the STOXX 600’s 3% gain so far in September.
* Ukrainian forces advancing further through territory recaptured from fleeing Russian soldiers also helped build confidence in some hopes that the energy crisis due to the Russian-Ukrainian war could ease in intensity.
* Markets now await US inflation data this week and a Federal Reserve monetary policy decision this month.