European stocks rose on Monday as investors welcomed economic data that signalled the central bank’s aggressive interest rate rise policy may soon peak.
Europe’s region-wide Stoxx 600 rose 0.4 per cent, extending its rally from last week, lifted by gains for real estate companies.
US stock futures also indicated that markets in New York would open higher. Contracts tracking Wall Street’s benchmark S&P 500 added 0.4 per cent and those tracking the tech-heavy Nasdaq gaining 0.3 per cent ahead.
Shares in Swedish real estate company SBB rebounded 3.9 per cent, after the group said on Friday that it had raised $276mn through the sale of construction company JM.
The value of SBB tumbled last week after S&P Global downgraded the company to junk status after concerns about its exposure to rising interest rates.
France’s Cac 40 added 0.4 per cent and Germany’s Dax was up 0.2 per cent after Eurostat, the EU statistics agency, reported that the eurozone’s industrial production fell 1.4 per cent year on year in March, after rising 2 per cent the previous month.
In particular, the drop in the production of capital goods, “certainly suggest that the additional tightening in credit standards might have hit activity at the end of the first quarter,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.
The reading was well below the 0.9 per cent rise forecast in a Reuters poll of economists, suggesting that the ECB’s tightening campaign was cooling the region’s economy faster than expected.
Meanwhile, Germany said its wholesale price index recorded its first year-on-year drop since December 2020.
Traders also prepared for the release of US retail sales data for April on Tuesday, which could offer insight into consumer sentiment as inflation cools. Analysts forecast that the Census Bureau will report a 0.7 per cent increase in overall retail sales from the previous month, following two months of declines.
However, many investors were looking ahead to the a breakthrough between the White House and Republicans in Congress over talks to avoid an unprecedented national default.
“The stock market is stuck until we reach a debt ceiling resolution and until we see more clarity from the regional banking sector, which are the two factors weighing on stocks right now,” said Brad Bernstein, managing director at UBS Wealth Management in the US.
The yield on interest rate-sensitive two-year Treasury bonds was up 0.013 percentage points at 4.01 per cent, while the yield on the 10-year bond was up 0.02 percentage points at 3.48 per cent. Bond yields rise when prices fall.
The dollar fell 0.2 per cent against a basket of six other currencies, despite data last week showing that US consumer expectations for long-term inflation had reached a 12-year high.
Asian stocks also rose, with China’s CSI climbing 1.6 per cent and Hong Kong’s Hang Seng index adding 1.8 per cent. China’s renminbi fell on Monday to its weakest level against the dollar in two months.